DEFA14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 1)
Filed by the
Registrant þ
Filed by a Party other than the
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o Preliminary
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o Confidential,
for Use of the SEC Only (as permitted by
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o Definitive
Proxy Statement
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þ Definitive
Additional Materials
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o Soliciting
Material Pursuant to §240.14a-12
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PHH CORPORATION
(Name of Registrant as Specified In
Its Charter)
N/A
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
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pursuant to Exchange Act
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Check box if any part of the fee is offset as provided by
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YOUR
BOARD OF DIRECTORS STRONGLY RECOMMENDS
THAT YOU VOTE THE WHITE PROXY CARD
TO ELECT THE BOARDS THREE NOMINEES
Dear PHH Stockholder:
At our Annual Meeting of Stockholders on June 10th, you
will have an important decision to make about who should be
elected to your Board for a three-year term -- the Board
Chairman and the Chief Executive Officer of your company or the
two nominees that Pennant has proposed as their replacements.
Your vote matters and we strongly recommend that you vote
the WHITE proxy card to elect the Boards slate of
candidates. We urge you to DISCARD any gold card sent to you by
Pennant.
THE
CHOICE IS CLEAR:
MESSRS. KRONGARD AND EDWARDS SHOULD BE RE-ELECTED
Your Board has nominated A.B. Krongard (PHHs Board
Chairman), Terence W. Edwards (PHHs President and Chief
Executive Officer) and James O. Egan (PHHs Audit Committee
Chairman) for a
three-year-term.
Pennant has nominated Messrs. Loren and Parseghian to
replace Messrs. Krongard and Edwards on your Board.
All three of your Boards candidates have the
qualifications and experience necessary to help your Board
continue to perform its leadership and stewardship functions. We
believe Messrs. Parseghian and Loren do NOT. Pennant has
made NO case for its nominees to replace PHHs Board
Chairman and Chief Executive Officer as Board
members.
In our judgment, the change in Board membership proposed by
Pennant is NOT in the best interests of all
stockholders and your investment in PHH will be better served by
voting the WHITE card to elect the Boards
nominees for the following reasons:
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THE BOARD HAS RISEN TO THE CHALLENGES AND IS FOCUSED ON WHAT
MATTERS
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PHH IS WELL-MANAGED AND HAS A SOLID TRACK RECORD
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PENNANTS NOMINEES DO NOT MERIT ELECTION TO THE BOARD
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PENNANT AND ITS NOMINEES HAVE NO SPECIFIC PLANS OR STRATEGIES
FOR PHH
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THE
BOARD HAS RISEN TO THE CHALLENGES AND
IS FOCUSED ON WHAT MATTERS
On two points -- and only two points -- we agree with
what Pennant wrote in its May 12, 2009 letter to you. We,
too, continue to believe strongly in the Companys
potential and the value of its intrinsic advantages... And
we, too, believe that the current economic climate in
general, and the housing and financing markets in particular,
have presented serious challenges... But on every other
point, we strongly disagree with Pennants claims and
believe that Pennant is the one who doesnt get
it.
We believe that surviving this unprecedented crisis in
the mortgage industry and global credit markets is a real
mark of success. We are not shy about repeating the point that
PHH is still here when many of our competitors have gone out of
business or been sold at fire sale prices. Not only
are we still here but, despite current market conditions, we are
poised to thrive as one of the largest remaining originators and
servicers, and the second-largest vehicle management services
provider in North America.
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Messrs. Parseghian and Loren have NOT had to manage a
company and preserve crucial client relationships in this
turmoil. We have! And we believe that we have done it
successfully and positioned PHH for a profitable future.
That was under the leadership of this Board, including our
Chairman and our Chief Executive Officer.
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We believe our survival and effective positioning for the
future are a reflection of the fundamentally sound business
models we have created and the prudent management of our
businesses since the Cendant spin-off in 2005, driven not by the
short-term and ultimately short-lived benefits of subprime
mortgage origination, but by a long-term view of what was in
your long-term best interests.
We believe that sustainable business growth is the
cornerstone of building long-term stockholder value. In the
current economic and capital markets environment, where
publicly-traded stocks have, until fairly recently, been in
their steepest decline for decades across all sectors, we
believe that only close and knowledgeable attention to the core
fundamentals of our businesses can offer you the potential for
appreciation in the value of your investment. We have been
keenly focused on these core fundamentals throughout the current
crisis and have positioned each of our businesses to drive
profitable and sustainable growth.
We believe the re-election of our Board Chairman and our
Chief Executive Officer as directors of PHH is critically
important to your Boards continued leadership and
stewardship functions in the pursuit of sustainable business
growth and long-term stockholder value.
PHH IS
WELL-MANAGED AND HAS
A SOLID TRACK RECORD
Contrary to Pennants assertions, we believe that
PHHs management has taken positive and thoughtful steps
that will enable PHH to capitalize on current market
dislocations. Our belief is based not only on our encouraging
first quarter 2009 results and the competitive position of our
mortgage origination and fleet management services businesses,
but on the proactive steps we have taken to address the current
operating environment and plan for future profitable
growth -- steps initiated under the leadership of
this Board, including our Chairman and our Chief Executive
Officer:
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PHH has shifted its mortgage origination product mix to higher
margin products, has eliminated or improved less profitable
relationships and is currently experiencing robust mortgage
origination margins. This shift helped us achieve our reported
Q109 mortgage production segment profit of $113M.
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PHHs mortgage production segment has shifted its personnel
cost structure from fixed to variable costs that are scaleable
with changes in production volumes, and has invested in best
practice technology and processes designed to improve
efficiencies and controls.
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PHHs fleet segment has implemented cost reduction
initiatives in anticipation of 2009 volume declines.
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PHHs fleet segment has, consistent with its contractual
obligations, implemented lease rate changes to more closely
match funding costs prospectively.
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Both the strong first quarter 2009 results we reported on
May 1, 2009, and the proactive steps we have taken to
reposition our businesses are reason for optimism in our outlook
for the year.
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Given $9 billion in production volume in the first quarter
and positive momentum carried into the second quarter, we
believe we are well on track to achieve our goal for a
profitable year.
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We expect our combined mortgage segments to earn
$70 million pre-tax for Q209, assuming stable interest
rates and minimal MSR valuation adjustments.
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We expect our fleet management services segment to earn
$7 million pre-tax for Q209 and $20 million to
$30 million pre-tax for the full year 2009.
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Fannie Mae and MBA are predicting over $2 trillion in industry
volumes for 2009 which, if realized, translates to over
$40 billion in originations for PHH assuming a 2% market
share.
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We encourage you to read more about our results and our views
about PHHs future in PHHs filings with the
Securities and Exchange Commission that are available at
www.sec.gov and are also accessible at www.phh.com
under the Investor Relations tab.
PENNANTS
NOMINEES DO NOT MERIT
ELECTION TO THE BOARD
In our last letter to you dated May 7, 2009, we expressed
our substantial reservations about Pennants nominees as
candidates for the Board and Pennants judgment in
selecting them. We stand by those statements and believe that
neither Mr. Parseghian nor Mr. Loren merits election
to the Board.
As to Mr. Parseghian, Pennants reaction to our
substantial reservations about his public record strikes us as
highly disingenuous. We did not invent
Mr. Parseghians record. Pennant chose
Mr. Parseghian as one of its candidates despite the
facts that:
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Mr. Parseghians role as Freddie Macs Chief
Investment Officer and then CEO has been the subject of public
questions since he was replaced as Freddie Macs CEO in
2003 at the instigation of the special examiner for the Office
of Federal Housing Enterprise Oversight (OFHEO), Freddie
Macs regulator at the time.
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Mr. Parseghian served as a director of Everquest Financial
at the time of Everquests failed attempt to go public with
a portfolio consisting predominantly of toxic, sub-prime
mortgage-backed securities previously owned by two Bear Stearns
hedge funds -- a matter of public record and criticism in
the business press since 2007.
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Did Pennant seriously believe that your Board, in the exercise
of its responsibility to respond to Pennants nomination of
Mr. Parseghian, would ignore the questions publicly raised
by others about his record in senior positions at a major
financial institution? Did Pennant really expect this Board to
disregard questions about his record as a director of a company
that tried and failed to go public with a business consisting
primarily of holding hundreds of millions of dollars worth of
toxic subprime-mortgage-backed CDOs acquired from two affiliated
(and subsequently defunct) Bear Stearns hedge funds at prices
that were not negotiated at arms-length? Did Pennant doubt that
we would scrutinize, on your behalf, his suitability for
election to the Board?
Pennant seeks to portray Mr. Parseghian as a scapegoat,
whose departure as Freddie Macs CEO was the result of
political and public pressure on OFHEO for failing to detect
accounting irregularities at Freddie Mac that occurred during
the period when Mr. Parseghian was Freddie Macs Chief
Investment Officer. But what Armando Falcon, Jr.,
OFHEOs special examiner into those irregularities,
actually said on August 22, 2003 seems to us to convey an
altogether different view of Mr. Parseghians tenure:
In the course of that special examination, OFHEO has
reviewed the conduct of certain senior executives. Based on that
review, I have concluded that CEO & President Greg
Parseghian...should be replaced. [emphasis
added]
Pennant also seeks to portray Mr. Parseghian as a
non-accountant who was not involved in accounting decisions made
by others. But OFHEOs December 2008 report of the special
examination seems to us to present a picture strikingly at odds
with Pennants attempt to position Mr. Parseghian as
uninvolved with Freddie Macs accounting irregularities
even in an oversight capacity. Consider, for example, the
following statement from page 47 of OFHEOs December
2008 report: In effect, the efforts of
Mr. Parseghian in Funding & Investments
sought to disguise $80 billion notional in
derivatives by using a leverage factor. Although the leveraged
swaps were executed, the Enterprise [i.e., Freddie Mac]
subsequently chose not to report a lower level of notional
balance. The records reviewed by the special examination do not
explain why management did not proceed with the scheme of
Mr. Parseghian. [emphasis added]
We reiterate our belief that, without passing judgment on
what actually happened at Freddie Mac and Everquest, the serious
questions about Mr. Parseghians record justify our
substantial reservations about his candidacy and Pennants
judgment in nominating him.
As to Mr. Loren, for whom Pennant does not claim any
mortgage industry or fleet industry experience, but rather a
proven track record of creating long-term value and
implementing change as chief executive officer of a well-known
public company, we say again that we see no evidence in
Pennants proxy materials that he has any experience at
building stockholder value in our particular mortgage
origination, mortgage servicing and fleet
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management businesses nor in confronting the challenges
that external events have created for our businesses.
We see no reason why you should elect Mr. Loren to
replace our Board Chairman or our Chief Executive Officer as
directors of PHH.
PENNANT
AND ITS NOMINEES HAVE NO
SPECIFIC PLANS OR STRATEGIES FOR PHH
Quite apart from our substantial reservations about the
qualifications of Pennants nominees as candidates for the
Board, we believe they should not be elected as directors in
place of our Board Chairman and our Chief Executive Officer
because neither they nor Pennant have advanced any specific plan
whatsoever. In stark contrast to our record of proactive and
thoughtful management of your company, Pennant states in its
proxy materials: While [Pennant and its nominees] have
identified what they believe to be failures and shortcomings of
Management and the Board, [Pennant and its nominees] have not
developed any specific plans or strategies to improve the
overall performance of the Company.
We certainly do not dispute the right of any stockholder to
criticize the Board or the management. On the contrary, we
welcome an open and constructive dialogue with our stockholders,
we value their input as owners of the company, and we
listen. We have tried to have such a dialogue with Pennant
for two years and we have carefully evaluated its position on a
variety of issues. On some issues we have strongly disagreed
with Pennant, on others we have agreed. For instance, we
strongly disagreed with Pennants vocal opposition to our
decision to recommend the sale of PHH at $31.50 per share to
affiliates of General Electric Capital Corporation and The
Blackstone Group, Inc. in 2007 (a transaction our stockholders
overwhelmingly approved, with 86% of the votes cast in favor,
but which did not close due to acquisition financing
difficulties that were symptomatic of the global credit crisis).
And we strongly disagreed with Pennant as to the suitability of
Mr. Parseghian as an addition to the Board. But, on the
other hand, we accepted Pennants suggestion that we take a
more robust approach to our public discussion of our financial
performance and have recently introduced certain non-GAAP
financial measures to assist investors in evaluating our
businesses. While we may not agree with every stockholder
recommendation, such recommendations will continue to be given
full and fair consideration. Replacing our Board Chairman and
Chief Executive Officer with Pennants nominees is not
necessary for PHHs stockholders to voice their concerns
and express their views. This Board will continue to consider
the views of individual stockholders as it always has. But
we strongly believe the re-election of Messrs. Krongard and
Edwards will contribute significantly to the Boards
ability to make judgments that are in the best interests of
all stockholders without giving undue deference to the
criticisms of any one stockholder when we have a considered
position that the stockholder is wrong on the merits.
However, Pennant now says that, because we have failed to heed
the criticisms with which we disagreed, Messrs. Krongard
and Edwards should be replaced on the Board. In effect,
Pennants position is that Pennant, and its hand-picked
candidates who have no specific plan or strategies for PHH, know
better than our Board what is in the best interests of
all PHH stockholders in this uniquely challenging
environment. We strongly dispute the merits of dissident
candidates whose sponsor urges our stockholders to elect them as
directors in place of our Board Chairman and our Chief Executive
Officer but offer NO platform except criticism.
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THIS
CHOICE MATTERS --
VOTE THE WHITE CARD TO ELECT
MESSRS. KRONGARD, EDWARDS AND EGAN
We believe that PHH is on the right path under the leadership
and stewardship of the current Board. We also believe that the
choice Pennant offers to you is NOT in your best interests as a
PHH stockholder. This is a time for prudent, proven and
experienced leadership on the PHH Board, not for experimenting
with dissident candidates as replacement directors for our Board
Chairman and Chief Executive Officer. The entire Board
enthusiastically supports the re-election of
Messrs. Krongard and Edwards, as well as the election of
Mr. Egan. The future of PHH may be in your hands with the
choice you make. We unanimously recommend that you choose
to elect the three candidates nominated by the Board and NOT to
replace PHHs Board Chairman and Chief Executive Officer as
directors with Pennants nominees. For important
information on how to cast your vote, please refer to the page
following our signatures.
The Board of Directors of PHH appreciates your time and
attention in this important matter. We respectfully ask for your
support.
Sincerely,
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A.B. Krongard
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George J. Kilroy
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Non-Executive Chairman of the Board
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Director and Executive Vice President
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Terence W. Edwards
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Ann D. Logan
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Director, President and Chief Executive Officer
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Director
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James W. Brinkley
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Jonathan D. Mariner
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Director
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Director
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James O. Egan
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Director
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If your shares are registered in your own name, please sign,
date and mail the enclosed WHITE proxy card to
Georgeson Inc. in the self addressed, stamped envelope provided.
If your shares are held in the name of a brokerage firm, bank,
nominee or other institution, you must provide instructions to
that entity so that your votes will be cast. Please sign, date
and mail the enclosed WHITE vote instruction form
and return it using the self-addressed, postage-paid envelope
provided.
YOU MAY
ALSO CAST YOUR VOTE USING YOUR TOUCH TONE PHONE OR VIA THE
INTERNET BY FOLLOWING THE INSTRUCTIONS ON YOUR WHITE PROXY
CARD OR VOTE INSTRUCTION FORM
After voting the enclosed WHITE proxy card, do not
sign or return any proxy card sent to you by Pennant Capital
Management, LLC. Remember -- only your latest dated proxy
will determine how your shares are to be voted at the meeting.
If you have voted a gold proxy card sent by Pennant, you can
change your vote by sending a later-dated WHITE
proxy card or vote instruction form or by providing
later-dated instructions by phone or internet.
If you have any questions or need assistance in voting your
shares, please contact our proxy solicitor.
199 Water Street, 26th Floor
New York, NY 10038
Banks and Brokers
(212) 440-9800
Stockholders Call Toll Free
(877) 278-9668
Forward-Looking
Statements
Statements in this letter release that are not historical facts
are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended (the Exchange Act). Such forward-looking
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.
Examples of forward-looking statements used in this letter
include statements regarding our beliefs and expectations
regarding 2009 operating and financial performance.
You should consider the areas of risk described under the
heading Cautionary Note Regarding Forward-Looking
Statements and Risk Factors in our periodic
reports filed with the SEC under the Exchange Act 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,
applicable stock exchange listing standards and unless otherwise
required by law, we undertake no obligation to release publicly
any updates or revisions to any forward-looking statements or to
report the occurrence or non-occurrence of anticipated or
unanticipated events.
Important
Additional Information
PHH Corporation, on May 7, 2009, filed a proxy statement in
connection with its 2009 Annual Meeting of Stockholders and
advises its stockholders to read that proxy statement because it
contains important information. Stockholders can obtain a free
copy of that proxy statement and other documents (when
available) that PHH files
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with the Securities and Exchange Commission at the
Commissions website at www.sec.gov. That proxy statement
and these other documents are also available free of charge by
directing a request to PHH Corporation, Attn: Investor
Relations, 3000 Leadenhall Road, Mt. Laurel, New Jersey 08054 or
visiting PHHs website at www.phh.com under the
Investor Relations tab.
PHH, its directors and named executive officers may be deemed to
be participants in the solicitation of proxies from PHH
stockholders in connection with the 2009 Annual Meeting of
Stockholders. Information regarding the names, affiliations and
interests of such individuals is contained PHHs proxy
statement referred to in the preceding paragraph.
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