H&R Block Confirms Loss, May Need More Financing

December 13, 2007 No Comments »

This morning, H&R Block confirmed its previous loss estimate of $502.3 million for its fiscal second quarter and announced a $74.8 million charge related to the failure of its subprime mortgage subsidiary Option One Mortgage.

The company’s filing with the Securities and Exchange Commission Thursday revealed the $74.8 million pretax restructuring charge for the termination of mortgage lending operations and also detailed some of the failed company’s lending results.

H&R Block said it didn’t securitize any mortgage loans during its second quarter, and reported that a staggering $4 billion of its $20.7 billion of Option One loans securitized or held for sale as of October 31 were more than 60 days past due, leading to losses of $100 million.

The company added that it continues to search for a suitor to take on its mortgage servicing division.

In the SEC filing, H&R Block also said it was “significantly and negatively impacted” by the subprime residential mortgage loan market and does not expect to be in compliance with capital requirements set by the Office of Thrift Supervision by April 30, 2008.

“If we are not in a position to cure deficiencies and if operating results continue to be below our plan, a resulting failure could impair our ability to repurchase shares of our common stock, acquire businesses or pay dividends.”

The OTS could take regulatory action against H&R Block, including monetary penalties, or force it to sell assets, the filing said.

Shares of H&R Block were down 81 cents, or 4.17%, to $18.61 in early afternoon trading on Wall Street.

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