PHH Shares Fall Following News Of Sale Of North American Fleet To Element

Compass Point Tuesday downgraded

to from Buy to Neutral due to the company's announcement that it will be selling the Fleet business to

. Compass Point analyst Kevin Barker reported on the sale, stating, "(The) Fleet was sold for approximately $1.4 billion, but the net proceeds to PHH would be $750-800M. The total net proceeds generated from the sale are in-line with our expectations, but the net gain on sale of $250-300M was lower than our expectation by roughly $100M." Barker continued, "We estimate $1.2B of this cash is unencumbered and can be utilized to buy back stock, pay dividends, prepay debt, or increase correspondent originations. However, the deployment of available cash will not be enough to push earnings high enough to justify a valuation multiple at TBV, and we do not expect a takeout of the mortgage business in the near-term." The sale of the Fleet is scheduled to be completed on July 31, 2014, at which point Barker said they will hear more details regarding the company's plan to deploy this capital from the sale. PHH shares have reacted to the news, trading down over seven percent to $23.44.