One collapsed deal may be embarrassing, but several will start to look troubling.

A month after a $1.8 billion deal to buy out PHH, a mortgage lender and vehicle fleet manager, fell apart, another Blackstone Group deal is in trouble.

After months of reassurances that its sale was on track, Alliance Data Systems says that its $6.8 billion buyout deal may now end up not closing.  

The transaction services and marketing company says that Blackstone sent it a letter after the market close on January 25 saying that the U.S. Office of the Comptroller of the Currency was demanding "extraordinary" requirements from the buyer, and that Blackstone does not expect to win regulatory approval from the agency for the merger.

The private equity firm also said that it believed that alternative solutions acceptable to Blackstone would not satisfy the O.C.C., and that further negotiations with the authority were at this point "futile." The takeover of Alliance Data was originally expected to close at the end of 2007.

Alliance Data said it strongly disagrees with Blackstone's assertions related to the O.C.C., that Blackstone's notice did not assert any breach of the merger agreement by Alliance Data, and that the company is evaluating possible courses of action.

The New York Times' DealBook cites a person close to Blackstone who confirmed the buyout firm's concern over the O.C.C., but added that the regulator's demands would have exposed the firm to millions of dollars in losses even after a potential sale of Alliance Data.

Another busted deal, even it is not for the financing problems that killed the PHH buyout, would be embarrassing to Blackstone, which, under its co-founder, Stephen Schwarzman, has had a strong reputation on Wall Street for completing deals even when the obstacles and the costs are high.

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