Meet the new year, same as the old year.

Another buyout has fallen apart because of financing problems, a reminder that the credit crunch that has starved dealmaking is nowhere near easing.

A mortgage lender and vehicle fleet manager, PHH, has terminated a $1.8 billion deal to sell itself to Blackstone Group and General Electric.

The collapse of the deal is an embarrassing setback to Blackstone and its co-founder and chief executive, Stephen Schwarzman, particularly since it is a relatively small deal.

Until now, Blackstone has had a reputation for completing deals even amid obstacles. Dana Cimilluca in the Wall Street Journal notes that that reputation as a reliable and committed dealmaker helps Blackstone in auctions. "If it is seen as a firm that takes buyout commitments lightly, that advantage would be lost," he says.

PHH is only the latest private equity deal to fall apart in recent months, joining Sallie Mae and Harman International Industries, among others.

Under the terms of the deal when it was announced in March, General Electric would get the vehicle fleet business and Blackstone would obtain the mortgage business.

While PHH, a 2005 spinoff from Cendant, is known for being predominantly a lender to prime, as opposed to subprime, borrowers, the mortgage business is not very popular these days among banks or investors.

J.P. Morgan Chase and Lehman Brothers were to finance Blackstone's part of the deal, but ultimately did not.
 
Blackstone could not obtain the debt financing to complete the deal, PHH said in a statement on Tuesday. PHH, based in Mount Laurel, New Jersey, has requested a break-up fee of $50 million from Blackstone.

"I am disappointed that we could not conclude the transactions contemplated by the merger agreement," said A.B. Krongard, nonexecutive chairman of the board. "The board will determine in due course whether to continue to explore the company's strategic alternatives."

Blackstone said it was also disappointed.

"Blackstone was prepared to close its end of the transaction using the financing that in March was originally committed to be made available," a Blackstone spokesperson said in an e-mail to Reuters. "We regret that the banks are now unwilling to provide financing under the terms they originally agreed to."

Also on Portfolio.com
The Year in Deals
The Bottom 10 Business Blunders of 2007