FORM 8-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 2, 2008
PHH CORPORATION
(Exact name of registrant as specified in its charter)
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MARYLAND
(State or other jurisdiction
of incorporation)
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1-7797
(Commission File Number)
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52-0551284
(IRS Employer
Identification No.) |
3000 Leadenhall Road
Mt. Laurel, New Jersey 08054
(Address of principal executive offices, including zip code)
(856) 917-1744
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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| Item 1.01. |
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Entry into a Material Definitive Agreement. |
Purchase Agreement
On March 27, 2008, PHH Corporation (“PHH”, “Company”, “we” or “our”) entered into a Purchase
Agreement (the “Purchase Agreement”) with Citigroup Global Markets Inc., J.P. Morgan Securities
Inc. and Wachovia Capital Markets, LLC (collectively, the “Initial Purchasers”), with respect to
our issuance and sale of $250 million in aggregate principal amount of 4.00% Convertible Senior
Notes due 2012 (the “Notes”). The aggregate principal amount of the Notes issued reflects the full
exercise of the over-allotment option granted to the Initial Purchasers with respect to the Notes.
The offering of the Notes was completed on April 2, 2008. The Notes will mature on April 15, 2012.
Upon conversion of the Notes, holders will receive cash up to the principal amount, and any excess
conversion value will be delivered, at our election, in cash, shares of our common stock or a
combination of cash and common stock.
The net proceeds from the offering were approximately $241 million. We used approximately $28
million of the net proceeds of the offering to pay the net cost of the convertible bond hedge and
warrant transactions described under “Convertible Bond Hedge and Warrant Transactions” below. We
intend to use the balance of the net proceeds of the offering to reduce the principal balance
outstanding under the Amended and Restated Competitive Advance and Revolving Credit Agreement,
dated as of January 6, 2006, among the Company, a group of lenders and JPMorgan Chase Bank, N.A.,
as administrative agent (the “Amended Credit Facility”).
The Purchase Agreement includes customary representations, warranties and covenants. Under the
terms of the Purchase Agreement, the Company has agreed to indemnify the Initial Purchasers against
certain liabilities.
Indenture
On April 2, 2008, $250 million in aggregate principal amount of the Notes were sold to the Initial
Purchasers at a price of $1,000 per Note, less an Initial Purchasers’ discount. The Notes are
governed by an indenture, dated as of April 2, 2008 (the “Indenture”), between the Company and The
Bank of New York, as trustee (the “Trustee”). The Notes will bear interest at a rate of 4.00% per
year, payable semiannually in arrears in cash on April 15th and October 15th of each year,
beginning on October 15, 2008. The Notes are our senior unsecured obligations and rank equally
with all of our existing and future senior debt and senior to all of our subordinated debt.
Holders may convert their Notes at their option on any day prior to the close of business on the
“scheduled trading day” immediately preceding October 15, 2011 only under the following
circumstances: (1) during the five business-day period after any five consecutive trading day
period (the “measurement period”) in which the trading price per Note for each day of that
measurement period was less than 98% of the product of the last reported sale price of our common
stock and the conversion rate on each such day; (2) during any calendar quarter after the calendar
quarter ending June 30, 2008, and only during such calendar quarter, if the last reported sale
price of our common stock for 20 or more trading days in a period of 30 consecutive trading days
ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the
applicable conversion price in effect on each such trading day; or (3) upon the occurrence of
specified corporate events. The Notes will be convertible, regardless of the foregoing
circumstances, at any time from, and including, October 15, 2011 through the third scheduled
trading day immediately preceding the maturity date.
Upon conversion we will pay cash based on a “daily conversion value” calculated on a proportionate
basis for each “VWAP trading day” of the relevant 60 VWAP trading day observation period. The
initial conversion rate for the Notes will be 48.7805 shares of common stock per $1,000 in
principal amount of Notes, equivalent to a conversion price of approximately $20.50 per share of
common stock. The conversion rate and the conversion price will be subject to adjustment in certain
events, such as distributions of dividends or stock splits.
Subject to certain exceptions, holders may require the Company to repurchase for cash all or part
of their Notes upon a “fundamental change” (as defined in the Indenture) at a price equal to 100%
of the principal amount of the Notes being repurchased plus any accrued and unpaid interest up to,
but excluding, the relevant repurchase date. The Company may not redeem the Notes prior to
maturity. In addition, upon a “make-whole fundamental change” (as defined in the Indenture), we
will in some cases increase the conversion rate for a holder that elects to convert its Notes in
connection with such make-whole fundamental change.
The Indenture contains certain events of default after which the Notes may be due and payable
immediately. Such events of default include, without limitation, the following: failure to pay
interest on any Note when due and such failure continues for 30 days; failure to pay any principal
of, or extension fee (if any) on, any Note when due and payable at maturity, upon required
repurchase, upon acceleration or otherwise; failure to comply with our obligation to convert the
Notes into cash, our common stock or a combination of cash and our common stock, as applicable,
upon exercise of a holder’s conversion right and such failure continues for 5 days; failure in
performance or breach of any covenant or agreement by us under the Indenture and such failure or
breach continues for 60 days after written notice has been given to us; failure by us to provide
timely notice of a fundamental change; failure to pay any indebtedness borrowed by us or one of our
significant subsidiaries in an outstanding principal amount in excess of $25 million if such
default is not rescinded or annulled within 30 days after written notice; failure by us to pay,
bond, post a letter of credit or otherwise discharge any judgments or orders in excess of $25
million within 60 days of notice; and certain events in bankruptcy, insolvency or reorganization of
the Company.
Convertible Note Hedge and Warrant Transactions
Concurrently with the pricing of the Notes, on March 27, 2008, the Company entered into convertible
note hedging transactions (collectively, the “Note Hedges”) with respect to our common stock (the
“Purchased Options”) with financial institutions that are affiliates of the Initial Purchasers
(collectively, the “Option Counterparties”). The Purchased Options cover, subject to anti-dilution
adjustments substantially identical to those in the Notes, 12,195,125 shares of our common stock.
The Purchased Options are intended to reduce the potential dilution upon conversion of the Notes in
the event that the market value per share of our common stock, as measured under the Notes, at the
time of exercise is greater than the conversion price of the Notes. The Note Hedges are separate
transactions, entered into by us with the Option Counterparties, and are not part of the terms of
the Notes. Holders of the Notes will not have any rights with respect to the Purchased Options.
Separately and concurrently with the pricing of the Notes, on March 27, 2008, the Company entered
into warrant transactions (collectively, the “Warrant Transactions”) whereby we sold to the Option
Counterparties warrants to acquire, subject to anti-dilution adjustments, 12,195,125 shares of our
common stock (the “Sold Warrants”). The Sold Warrants expire after the Purchased Options.
The Note Hedges and Warrant Transactions are intended to reduce potential dilution to our common
stock upon potential future conversion of the Notes and generally have the effect of increasing the
conversion price of the Notes to $27.20 per share, representing a 60% premium based on the closing
price of our common stock on March 27, 2008. If the market value per share of our common stock, as
measured under the Sold Warrants, exceeds the strike price of the Sold Warrants, the Sold Warrants
will have a dilutive effect on our earnings per share. The Warrant Transactions are separate
transactions, entered into by the Company with the Option Counterparties, and are not part of the
terms of the Notes. Holders of the Notes will not have any rights with respect to the Sold
Warrants.
In connection with the Note Hedges and Warrant Transactions, we entered into confirmation letters
with the Option Counterparties (collectively, the “Confirmations”) setting forth the terms and
conditions of the Note Hedges and Warrant Transactions.
Relationships
The Initial Purchasers have performed investment banking and advisory services for us from time to
time for which they have received customary fees and expenses. The Initial Purchasers may, from
time to time, engage in transactions with and perform services for us in the ordinary course of
their business. In addition, affiliates of the Initial Purchasers are lenders under our Amended
Credit Facility, and certain other existing funding arrangements to which we or certain of our
subsidiaries are parties. After payment of the net cost of the Note Hedges and Warrant
Transactions, we intend to use the remainder of the net proceeds from the issuance of the Notes to
reduce the principal balance under our Amended Credit Facility.
The foregoing summary of the Indenture, Notes, Purchase Agreement, Note Hedges, Warrant
Transactions and Confirmations set forth above is qualified in its entirety by reference to the
full text of the Indenture, Notes, Purchase Agreement, Master Terms and Conditions for Convertible
Note Hedging Transactions, Master Terms and Conditions for Warrant Transactions and the
Confirmations, copies of which are attached to this Current Report on Form 8-K (“Form 8-K”) as
Exhibits 4.1, 4.2, 10.1, 10.2, 10.3, 10.4, 10.5, 10.6, 10.7, 10.8, 10.9, 10.10, 10.11, 10.12 and
10.13, respectively, and incorporated herein by reference.
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| Item 2.03. |
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Creation of a Direct Financial Obligation or an Obligation Under an Off-Balance Sheet
Arrangement of a Registrant. |
The information set forth under Item 1.01 of this Form 8-K is incorporated herein by reference.
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| Item 3.02. |
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Unregistered Sales of Equity Securities. |
The information set forth under Item 1.01 of this Form 8-K is incorporated herein by reference.
The Notes, Note Hedges, Warrant Transactions and the shares of common stock underlying such
securities (the “Securities”) have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), or any applicable state securities laws, and were offered only to
“qualified institutional buyers” pursuant to Rule 144A promulgated under the Securities Act. The
offering and sale of the Securities to the Initial Purchasers was made in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act.
On April 2, 2008, the Company issued a press release announcing the closing of the private
placement of the Notes. The full text of the press release is attached to this Form 8-K as Exhibit
99.1 and incorporated herein by reference.
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| Item 9.01. |
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Financial Statements and Exhibits. |
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(d)
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Exhibits |
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Exhibit 4.1
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Indenture dated as of April 2, 2008, by and between PHH Corporation and The Bank
of New York, as Trustee |
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Exhibit 4.2
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Form of Global Note 4.00% Convertible Senior Note Due 2012 (included as part of
Exhibit 4.1) |
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Exhibit 10.1
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Purchase Agreement dated March 27, 2008 by and between PHH Corporation,
Citigroup Global Markets Inc., J.P. Morgan Securities Inc. and Wachovia Capital
Markets, LLC, as representatives of the Initial Purchasers |
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Exhibit 10.2
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Master Terms and Conditions for Convertible Bond Hedging Transactions dated
March 27, 2008 by and between PHH Corporation and J.P. Morgan Chase Bank, N.A. |
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Exhibit 10.3
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Master Terms and Conditions for Warrants dated March 27, 2008 by and between
PHH Corporation and J.P. Morgan Chase Bank, N.A. |
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Exhibit 10.4
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Confirmation of Convertible Bond Hedging Transactions dated March 27, 2008 by
and between PHH Corporation and J.P. Morgan Chase Bank, N.A. |
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Exhibit 10.5
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Confirmation of Warrant dated March 27, 2008 by and between PHH Corporation and
J.P. Morgan Chase Bank, N.A. |
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Exhibit 10.6
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Master Terms and Conditions for Convertible Bond Hedging Transactions dated
March 27, 2008 by and between PHH Corporation and Wachovia Bank, N.A. |
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Exhibit 10.7
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Master Terms and Conditions for Warrants dated March 27, 2008 by and between
PHH Corporation and Wachovia Bank, N.A. |
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Exhibit 10.8
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Confirmation of Convertible Bond Hedging Transactions dated March 27, 2008 by
and between PHH Corporation and Wachovia Bank, N.A. |
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Exhibit 10.9
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Confirmation of Warrant dated March 27, 2008 by and between PHH Corporation and
Wachovia Bank, N.A. |
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Exhibit 10.10
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Master Terms and Conditions for Convertible Bond Hedging Transactions dated
March 27, 2008 by and between PHH Corporation and Citibank, N.A. |
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Exhibit 10.11
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Master Terms and Conditions for Warrants dated March 27, 2008 by and between
PHH Corporation and Citibank, N.A. |
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Exhibit 10.12
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Confirmation of Convertible Bond Hedging Transactions dated March 27, 2008 by
and between PHH Corporation and Citibank, N.A. |
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Exhibit 10.13
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Confirmation of Warrant dated March 27, 2008 by and between PHH Corporation
and Citibank, N.A. |
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Exhibit 99.1
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Press Release dated April 2, 2008. |
Forward-Looking Statements
This Form 8-K and the press release attached as Exhibit 99.1 hereto contain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward looking statements
include the following: (i) our intention regarding the use of the net proceeds of the offering;
(ii) our expectations regarding the effect on the price of our common stock from the convertible
note hedge and warrant transactions and various derivative transactions; and (iii) our engagement
of the Initial Purchasers, from time to time, in transactions with and performance of services for
us in the ordinary course of their business. These statements are subject to known and unknown
risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. You should understand that these
statements are not guarantees of performance or results and are preliminary in nature. Statements
preceded by, followed by or that otherwise include the words “believes”, “expects”, “anticipates”,
“intends”, “projects”, “estimates”, “plans”, “may increase”, “may result”, “will result”, “may
fluctuate” and similar expressions or future or conditional verbs such as “will”, “should”,
“would”, “may” and “could” are generally forward-looking in nature and not historical facts.
You should consider the areas of risk described under the heading “Cautionary Note Regarding
Forward-Looking Statements” in our periodic reports under the Exchange Act and those risk factors
included as “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December
31, 2007, in connection with any forward-looking statements that may be made by us and our
businesses generally. Except for our ongoing obligations to disclose material information under
the federal securities laws, we undertake no obligation to release publicly any updates or
revisions to any forward-looking statements, to report events or to report the occurrence of
unanticipated events unless required by law.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned hereunto duly authorized.
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PHH CORPORATION |
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By:
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/s/ Clair M. Raubenstine |
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Name:
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Clair M. Raubenstine |
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Title:
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Executive Vice
President and Chief
Financial Officer |
Dated: April 3, 2008