With the sale of its fleet business a done deal, PHH Corp. is making plans for using the fresh capital from the sale — including bolstering its mortgage unit.
The Mt. Laurel, N.J.-based company disclosed on Monday that it completed the sale of PHH Arval to Element Financial Corp. on July 1.
Out of a $1.4 billion cash price, net proceeds after the payment of expected taxes and transaction expenses are expected to be $821 million — leaving it with $1.74 billion in cash and cash equivalents.
PHH said it intends to redeem $170 million in senior notes, repay $250 million in additional senior notes and make up to $450 million in share repurchases.
As much as $200 million will be utilized to re-engineer PHH Mortgage’s operations and support infrastructure.
The focus will be on restructuring the private label business model, cutting production expenses to align with expected lower volumes and consolidating corporate and mortgage support infrastructure.
In addition, investments will be made in technology to support growth and productivity.
Another $150 million will be invested in growth initiatives to enhance scale and profitability and diversify revenue streams across mortgage production and servicing.
PHH plans to expand its originations through its private label business by targeting community banks and credit unions that want to outsource their mortgage business. It will also focus on expanding its target market within its existing private label client base.
PHH expects to grow its market share of purchase originations with improved capture rates and additional investments in its real estate channel.
PHH is also considering acquisitions to expand its retail mortgage market share and leverage its fixed-cost infrastructure.
“PHH’s unique outsourcing offering and market access, superior operating capabilities and financial flexibility provide competitive advantages that position us for success,” PHH Corp. President and Chief Executive Officer Glen A. Messina stated in the announcement. “We are confident that our planned actions will improve the profitability of our mortgage business and continue to enhance shareholder value while we maintain a strong focus on operational execution and customer service.”
