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H&R Block Is Shutting Lending UnitKANSAS CITY, Mo., Dec. 4 (AP) — H&R Block, the tax preparer, said on Tuesday that it was closing its mortgage-lending arm after the sale of the subprime unit fell through. The company and the equity firm Cerberus Capital Management said they had terminated their agreement, announced in April, for a Cerberus subsidiary to buy H&R Block’s lending arm, the Option One Mortgage Corporation. H&R Block has stopped accepting mortgage applications and will lay off about 620 employees, close three offices and take a $75 million restructuring charge as it shuts operations, the company said. The company said it would honor $30 million in existing commitments. Most of these will be eligible for sale to the government subsidized mortgage buyers, Fannie Mae or Freddie Mac, H&R Block said, with the rest sold to investors. H&R Block said it would also sell its servicing business, which will result in another asset impairment charge for the quarter ended Oct. 31; the charge will be no more than $125 million. The company hired Lazard to handle that sale and said the value of the unit was being determined. Kathleen Shanley, an analyst for the corporate bond research firm Gimme Credit, said in a note to clients that Option One had a net book value of $1.1 billion as of July, according to the latest available figures. “Given the ongoing and severe deterioration in the subprime sector, it would surprise us if a $125 million charge would be sufficient to mark down this business to its current value,” Ms. Shanley wrote. Cerberus and H&R Block tried to renegotiate the agreement regarding Option One over the last several months as the mortgage market was rocked by subprime defaults and tightened lending. Under the original deal, Cerberus was to pay $300 million less than Option One’s net asset value. H&R Block plans to release second-quarter results on Monday. Tag CloudExternal InformationAdditional InformationWorld Business Briefing | Global Trade: Japan and Chile Sign Trade Pact...Modestly, Stores Beat January Sales Outlook... Time ripe for Melbourne purchases, says Orchard... Municipalities Feel Pinch as Another Debt Market Falters... Where Am I?News Main Page - Business - H&R Block Is Shutting Lending Unit |
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