Ocwen to acquire PHH for $360 million using $260 million of PHH cash

By Devika Patel

Knoxville, Tenn., Feb. 28 – Ocwen Financial Corp. plans to use available cash on PHH Corp.’s balance sheet to acquire PHH through a $360 million all cash transaction for $11 per PHH share.

There will be sufficient cash on PHH’s balance sheet to enable $260 million of the $360 million purchase price to be funded out of PHH’s available cash.

As part of the transaction, Ocwen will assume $119 million of PHH’s outstanding unsecured debt.

“The $360 million purchase price will be paid in cash, with about $260 million of the purchase price being funded by cash currently on the PHH balance sheet that is otherwise available for distribution,” Ocwen president and chief executive officer Ronald M. Faris said on the company’s conference call announcing the acquisition and fourth quarter and year ended Dec. 31 earnings on Wednesday.

“Ocwen also plans to secure $50 million of servicing advance financing against some of PHH’s advances.

“We have received positive indications that our existing lenders will participate in this advance facility.

“Ocwen will contribute the remaining $74 million, which includes $10 million in deal expenses and $14 million in other items, that will be subsequently recovered over time,” he said.

The company is paying less for the company than the expected cash balance at PHH at closing, due to PHH’s losses from restructuring and changing structure.

“We are paying less for the company than their expected cash balance at closing.

“This is a function of the built-in losses expected for PHH as they continue their restructuring and evolution to their previously announced 2.0 structure.

The transaction is targeted to close in the third or fourth quarter of 2018.

The company had over $500 million of adjusted pro forma liquidity as of Dec. 31.

Ocwen is a financial services holding company based in West Palm Beach, Fla. PHH is a Mt. Laurel, N.J.-based business process management services company for the mortgage and fleet management industries.

© 2015 Prospect News.
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