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S&P downgrades PHH over debt repayment doubts

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PHH Corp. (PHH: 10.52 -5.31%) saw its stock plummet almost 15% Thursday after Standard & Poor's Ratings Services raised concern that the mortgage company will not be able to pay unsecured corporate debt.

PHH's stock fell .91, or 14.67%, to close at .11. The stock is down 52% so far this year.

S&P downgraded PHH's credit and unsecured debt from "BB+" to "BB-" late Wednesday, and said it could downgrade the company another notch if "management is unable to execute a clear strategy" to repay the debt due in March 2013.

The ratings service, however, said it does think PHH will be able to repay the 3 million in debt "exclusively from free corporate cash flows."

The outlook, S&P said, is a reflection of PHH's "reduced financial flexibility" as well as uncertainty in the U.S. mortgage market. PHH was the seventh-highest originator of mortgages in 2010 at billion, making up 3.1% of the market.

PHH reported a loss of 8 million in the third quarter, a significant widening form million for the third quarter 2010.

Stock moved higher for other mortgage originators and banks Thursday, including Wells Fargo (WFC: 27.785 +1.96%), U.S. Bancorp (USB: 27.49 +0.55%), Bank of America (BAC: 5.60 +2.38%), Citigroup (C: 27.46 -0.69%) and JPMorgan Chase (JPM: 33.57 +0.36%).

Write to Andrew Scoggin.

Follow him on Twitter @ascoggin.


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