GE agreed on March 15 to buy PHH, sell the mortgage division to New York-based Blackstone and keep the vehicle- leasing unit. The acquisition price was $31.50 a share. PHH said September 17 that JPMorgan Chase & Co. and Lehman Brothers Holdings Inc. told Blackstone they may fall $750 million short in funding the private equity firm's part of the deal.

Blackstone “was not able to obtain the requisite debt financing,” PHH said on Tuesday in a Business Wire statement. “The board will determine in due course whether to continue to explore the company's strategic alternatives.”

The deal collapsed as banks struggle to unload debt from 2007's record $438 billion of leveraged buyouts.

Losses from securities tied to subprime mortgages cut demand for higher- yielding assets. JPMorgan, Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley have offered discounts of up to 10 cents on the dollar to clear a backlog of high-yield bonds and loans.

No assurance

PHH said it asked for $50 million from Blackstone as a termination fee, in terms of the agreement. GE, which is based in Fairfield, Connecticut, was to make the acquisition of the vehicle-leasing unit through its commercial finance division.  PHH, based in the Philadelphia suburb of Mount Laurel, New Jersey, has provided mortgages and related services such as billing for other companies to offer under their own brands, including American Express Co. and Charles Schwab Corp.

“There can be no assurance that any further exploration of strategic alternatives that the board may determine to undertake will result in any agreements or transactions,” PHH said.

Leveraged buyouts declined to $101.9 billion in the second half from $336.4 billion in the first six months as the subprime market collapsed.

Lower premiums earlier in 2007 allowed private-equity firms led by Kohlberg Kravis Roberts & Co. and Blackstone to pursue the biggest LBOs ever.

Buyout groups, which use their own funds and debt to pay for takeovers and then improve profit by boosting sales, selling assets and cutting costs, required lenders to provide funds while subprime contagion spread.