PHH fires back at Pennant, asks shareholders for support on June 10

By Lisa Kerner

Charlotte, N.C., May 20 - PHH Corp. asked shareholders to elect its nominees, chairman A.B. Krongard, chief executive officer Terence Edwards and audit committee chairman James O. Egan, to the board of directors at the annual meeting on June 10.

Pennant Capital wants to replace Krongard and Edwards with its nominees, Allan Loren and Greg Parseghian.

In a Wednesday letter to shareholders, PHH said the change in board membership proposed by Pennant Capital is not in their best interests.

PHH said "surviving this unprecedented crisis in the mortgage industry and global credit markets is a real mark of success."

"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," PHH said in the letter.

Pennant responded to PHH in a statement released on Wednesday.

"Once again, PHH's board of directors is actually attempting to convince stockholders that PHH's very survival in the current economic environment is a 'real mark of success,'" Pennant managing member Alan Fournier said.

"The real mark of success and of good management is the ability to make the right decisions about the factors you can control," Fournier said.

PHH, in its letter to shareholders, questioned the qualifications of Parseghian, the former CEO of Freddie Mac, and Loren, who the company said lacks mortgage industry or fleet industry experience.

Regarding the concerns, Fournier said, "Stockholders should be very wary of a board that is so comfortable with character assassination."

PHH said Pennant's nominees "have not developed any specific plans or strategies to improve the overall performance" of PHH.

As previously reported, Pennant sought PHH shareholder support in its own letter to shareholders on Tuesday.

PHH, under Krongard and Edwards' leadership, has been poorly managed, said Pennant.

According to Pennant, PHH must, among other things:

• Build a more flexible cost structure targeted for profitability in all environments;

• Establish compensation arrangements that base management incentives on factors that are within management's control; and

• Fully evaluate the profitability of each existing and potential client contract, with a view toward profitable growth.

Pennant, with a 9.94% stake in PHH, also expressed concern about the company's ability to refinance its unsecured credit facility that comes due is approximately 18 months.

According to Pennant, there is nearly $1 billion drawn on the facility as of March 31.

PHH is an outsource provider of mortgage and vehicle fleet management services based in Mt. Laurel, N.J.

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