June 16, 2009
VIA EDGAR AND FED EX
- --------------------
Mellissa Campbell Duru, Esq.
Special Counsel
Office of Mergers and Acquisitions
Securities and Exchange Commission
100 F Street, N.E.
Washington D.C. 20549-3628
Re: PHH Corporation, Inc.
Definitive Soliciting Materials filed on Schedule 14A on May 20, 2009
and June 3, 2009 by Pennant Capital Management, LLC, Pennant Spinnaker
Fund LP, Pennant Offshore Partners, Ltd., Pennant Onshore Partners,
LP, Pennant Onshore Qualified, LP, Pennant Windward Fund, LP, Pennant
Windward Fund, Ltd., Alan Fournier, Allan Z. Loren, and Gregory J.
Parseghian (File No. 1-07797)
Amendment No. 9 to Schedule 13D filed on March 9, 2009 by Alan
Fournier and Pennant Capital Management, LLC (File No. 5-13543)
---------------------------------------------------------------
Dear Ms. Duru:
On behalf of Pennant Capital Management, LLC, Pennant Spinnaker Fund LP, Pennant
Offshore Partners, Ltd., Pennant Onshore Partners, LP, Pennant Onshore
Qualified, LP, Pennant Windward Fund, LP, Pennant Windward Fund, Ltd., Alan
Fournier, Allan Z. Loren and Gregory J. Parseghian (collectively, the
"Soliciting Persons"), we have provided herein the Soliciting Persons' responses
to your letter of June 3, 2009 containing the Staff's comments regarding the
Definitive Soliciting Materials filed on Schedule 14A on May 20, 2009 and June
3, 2009 by the Soliciting Persons with respect to PHH Corporation (the
"Company") and Amendment No. 9 to Schedule 13D filed on March 9, 2009 by Alan
Fournier and Pennant Capital Management, LLC (collectively, "Pennant"). For your
convenience, the full text of each of the Staff's comments is set forth below in
bold type, and the Soliciting Persons' response to each comment directly follows
the applicable text. In addition, three copies of the supplemental information
referred to in the responses below are enclosed.
Mellissa Campbell Duru, Esq.
Special Counsel
Securities and Exchange Commission
June 16, 2009
Page 2
General
- -------
1. We refer you to comment 27 of our letter dated April 22, 2009 and comment 8
of our letter dated May 1, 2009. We disagree with the conclusions set forth
in your responses. Given the fact that Mr. Fournier and Pennant Capital
have continuously reported in the aggregate, shares over which Mr. Fournier
through Pennant GP exercises voting and investment control on Schedule 13D,
it would appear that the onshore and offshore Pennant entities, their
investment advisors/managers and Mr. Fournier act together and are making a
single filing to report all shares owned amongst such persons. Refer to
Rules 13d-5 and 13d-1(k). Please revise your Schedule 13D filings to
include as filing persons each of the offshore and onshore funds and
Pennant GP.
As discussed and clarified with you on June 11, 2009, neither Mr. Fournier
nor Pennant Capital has exercised voting or investment control over PHH
stock through Pennant GP. Pennant GP and Pennant Capital are "sister"
entities, each controlled by Alan Fournier and neither owning an interest
in or controlling the other. Pennant GP is the general partner of the
domestic Funds, which collectively hold approximately 4.1% of the PHH
stock, and Pennant GP therefore beneficially owns, within the meaning of
Rule 13d-3, the PHH stock directly owned by the domestic Funds. However,
Pennant GP has no employees nor more than nominal assets, and Mr. Fournier
does not manage the investments of the domestic Funds through Pennant GP.
(In addition, Pennant GP has no function or role with respect to the
offshore Funds.)
Pennant Capital, on the other hand, is the investment adviser of both the
domestic Funds and the offshore Funds and beneficially owns, within the
meaning of Rule 13d-3, the PHH stock directly owned by both the domestic
Funds and the offshore Funds (an aggregate of approximately 9.9%). Pennant
Capital employs investment professionals (in addition to Mr. Fournier, its
managing member) to assist in the management of the domestic and offshore
Funds' assets. With the assistance of these investment professionals, Mr.
Fournier manages the investments of both the domestic Funds and the
offshore Funds through Pennant Capital. Mr. Fournier therefore beneficially
owns, within the meaning of Rule 13d-3, 9.9% of the PHH stock, all of which
he beneficially owns through Pennant Capital and 4.1% of which he also
beneficially owns through Pennant GP.
Because Pennant Capital rather than Pennant GP manages the domestic Funds'
investments, including their investments in PHH, Pennant GP has not agreed
(and has no reason to agree) to act together with any other person for the
purpose of acquiring, holding, voting or disposing of any equity securities
of PHH. Pennant GP has not made any investment decisions with respect to
the PHH shares held by any of the Funds (including the domestic Funds for
which it serves as general
Mellissa Campbell Duru, Esq.
Special Counsel
Securities and Exchange Commission
June 16, 2009
Page 3
partner), and has not agreed with any person as to any action or inaction
with respect to those shares. As a result, in the absence of any such
agreement, Pennant GP does not beneficially own any shares of PHH stock by
virtue of Rule 13d-5(b)(1) (although it does beneficially own 4.1% of the
PHH stock, as indicated above, by virtue of Rule 13d-3).
Similarly, none of the Funds is a member of a "group" with respect to the
PHH stock because none of the Funds has agreed to act together with any
other person for the purpose of acquiring, holding, voting or disposing of
any equity securities of PHH. In its capacity as investment manager or
advisor to each of the Funds, and without any action or agreement on the
part of any of the Funds, Pennant Capital acquired shares of PHH stock for
the accounts of each of the Funds and has made all other decisions in
respect of such stock on behalf of the Funds. The Funds themselves have not
made any investment decisions with respect to the shares held by them, and
they have not agreed with any person as to any action or inaction with
respect to those shares. As a result, in the absence of any such agreement,
none of the Funds beneficially owns pursuant to Rule 13d-5(b)(1) any shares
of PHH stock that are directly held by any other Fund.
The 13D filers have been Alan Fournier and Pennant Capital because each
beneficially owns more than 5% of the PHH stock. Neither Pennant GP nor any
of the Funds beneficially owns more than 5% of the PHH stock by virtue of
Rule 13d-3 or Rule 13d-5(b)(1). Accordingly, neither Pennant GP nor any of
the Funds is a 13D reporting person notwithstanding the fact that the PHH
shares they directly own are also beneficially owned by Alan Fournier and
Pennant Capital and serve as part of the beneficial ownership that causes
Mr. Fournier and Pennant Capital to have to file.
Soliciting Materials filed 5-20-09
- ----------------------------------
2. Avoid statements that directly or indirectly impugn character, integrity or
personal reputation or make charges of illegal or immoral conduct without
factual foundation. Refer to Rule 14a-9. While you may highlight the
disagreements you have with the way the PHH Board has drawn comparisons
between your nominees and their nominees, in future filings, avoid
assertions that the PHH Board is engaged in "character assassination."
Comment acknowledged.
3. Further to our prior comment. You reference in the press release
"unbelievable" assertions and "inappropriate comparisons" that PHH has
made. Your statements could be read to imply that the PHH Board is
Mellissa Campbell Duru, Esq.
Special Counsel
Securities and Exchange Commission
June 16, 2009
Page 4
attempting to mislead shareholders. In future filings revise to delete or
provide a sufficient basis for your assertions in the document.
Comment acknowledged.
Soliciting Materials filed 5-20-09
- ----------------------------------
Urgency of this Vote, page 4
----------------------------
4. You disclose that "without meaningful improvements...PHH's stock could
potentially revisit such low valuations..." We refer you to Rule 14a-9(a).
Provide us with the basis for such predictions. Also, please confirm that
in future filings you will avoid statements that are attempts to predict
future market values.
The Soliciting Persons do not believe the statement made in the referenced
filing violates Rule 14a-9(a), including as that rule is elaborated on by
paragraph (a) of the note thereto, which states that: "The following are
some examples of what, depending upon particular facts and circumstances,
may be misleading within the meaning of this section: (a) Predictions as to
specific future market values." (emphasis supplied)
The full statement in the referenced filing states: "Without meaningful
improvements in communications, incentive compensation structure and
sustained mortgage profitability, PHH's stock could potentially revisit
such low valuations if the current refinancing boom dissipates."
The Soliciting Persons believe that this statement is not seeking to
predict future market values. The statement says, rather, that under
specified circumstances, the stock "could potentially" revisit low prior
valuations. By using those two strong qualifiers - both "could" and
"potentially," the Soliciting Persons made it very clear that this was not
a prediction of what will be but rather a view on what might possibly
happen to the stock price (and by the very nature of the words "could
possibly," the statement also clearly implies that the stock may not
revisit such low valuations). The statement, while it does reference the
stock price, is no more remarkable than a statement to the effect that if
the current refinancing boom dissipates it is possible that the company
won't be doing so well.
The basis for the statement is the Soliciting Persons' belief that the
recent performance of the company, which lifted the stock price from the
"low valuations" referred to, is substantially attributable to the
performance of its mortgage businesses in light of the refinancing boom
that has been engendered by government intervention in the financial
markets to reduce interest rates and take other steps to aid the
refinancing of residential mortgages. This belief is supported by a May 4,
2009 equity research report on the company by Keefe, Bruyette &
Mellissa Campbell Duru, Esq.
Special Counsel
Securities and Exchange Commission
June 16, 2009
Page 5
Woods ("KBW"), which was subtitled "PHH: Raising Estimates on Increased
Refis - Reiterate OP [Outperform] on PHH." Specifically, that report
supports the belief that the mortgage production segment (driven by
refinancings), as opposed to PHH's other segments (mortgage servicing and
fleet management services), has been driving stock price improvements (from
$4.67 per share on November 11, 2008 to the $16.87 per share cited in the
KBW report):
"We are sharply raising our EPS estimates to reflect an expected
pickup in refinance activity and a continuing strong gain-on-sale
margin. Our EPS estimates increase to $2.31 in 2009 from $0.27 and
$3.16 in 2010 from $0.43. We are increasing our price target to $25
from $20. ... We are increasing our EPS estimates based on our higher
national mortgage volume assumption and an increase in the estimated
mortgage production margin. ... We believe that the mortgage servicing
segment will continue to generate losses, although at a lower level
than 1Q. ... We expect fleet management income to stay low. This
business should continue to underperform as funding costs remain
high."
The Soliciting Persons confirm that, in future filings, they will avoid
statements that are attempts to predict future market values in violation
of Rule 14a-9(a).
5. To the extent that you include the announcement of your nominees amongst
the list of factors that could have potentially resulted in the improvement
of PHH's stock performance recently, in future filings, please set forth
support for your assertion and revise to clarify that there is not
necessarily any co-relation between the announcement of your nominees and
the stock's performance.
Comment acknowledged.
6. In future filings emphasize the fact that your nominees, even if elected,
would constitute a minority of the board and there can be no assurances
that you would be able to accomplish any changes to the current business
model and operations of the Company.
Comment acknowledged.
Soliciting Materials filed June 3, 2009
- ----------------------------------------
7. Please provide us with the June 1, 2009 RiskMetrics report you reference.
Pennant has enclosed herewith a copy of the June 1, 2009 RiskMetrics
report. The statement in the referenced Soliciting Materials is to a
sentence on page 16 of the RiskMetrics report under the heading "Funding
Concerns."
Mellissa Campbell Duru, Esq.
Special Counsel
Securities and Exchange Commission
June 16, 2009
Page 6
* * * * *
Please contact me if we can provide any additional information or clarification
with respect to this revised submission.
Very truly yours,
/s/ Michael A. Schwartz
Michael A. Schwartz