Irvine’s Option One Mortgage Corp. continues to haunt Kansas City-based tax preparer H & R; Block Inc. as the company said Thursday it may need to raise money to offset losses and charges from closing subprime lender Option One.
H & R; Block may tap out existing credit lines and have to issue debt or more shares, it said.
The company said it has been “significantly and negatively impacted” by the meltdown in subprime mortgages made to borrowers with poor credit.
H & R; Block is taking a $75 million charge to close Option One. The company took $35 million of the charge in the October quarter and plans to take the rest in the current quarter through January.
Earlier this month, H & R; Block said a deal to sell Option One to private equity firm Cerberus Capital Management was off.
H & R; Block and Cerberus announced a possible sale in April. At the time H & R; Block said Option One’s value was estimated to be close to $1 billion.
The rapidly deteriorating subprime market immediately cast doubt on a deal of that size being closed.
For the quarter through Oct. 31, H & R; Block lost $502.3 million, versus a loss of $156.5 million a year earlier.
Even without Option One, H & R; Block’s loss from continuing operations was more than what Wall Street had expected.
