S&P lowers H&R Block credit rating |
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Fri, 31 Aug 2007 21:37
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NEW YORK (AP) - Standard & Poor's Ratings Services on Friday lowered its credit rating on H&R Block Inc. because of concerns over the tax preparer's planned sale of its subprime mortgage lending unit.S&P lowered H&R Block's counterparty credit rating to 'BBB-/A-3' from 'BBB+/A-2.' Both are investment-grade ratings. S&P removed the ratings from CreditWatch Negative and said its outlook on the company is negative.'This rating action reflects our concerns regarding the company's planned disposition of its Option One subsidiary; significant additional losses incurred by mortgage operations since the end of fiscal 2007; increased debt and decreased funding flexibility; and weakened capital position,' said Rian M. Pressman, an S&P credit analyst, in a statement.H&R Block agreed earlier in the year to sell its subprime mortgage lending subsidiary Option One Mortgage Corp. to private equity firm Cerberus Capital Management LP for $300 million less than Option One's tangible net asset value. That value was to be determined at a later date, which has been one of the holdups in the deal.As the mortgage market continues to decline and H&R Block's losses from its mortgage operations have grown at a rapid pace, the company says it is in talks with Cerberus to renegotiate the deal.'We believe that any renegotiated deal would occur on less-favorable terms than we had previously contemplated,' Pressman wrote.S&P said it remains positive about the company's core tax and business services operations, as well as its ability to maintain adequate funding through its disposition of Option One. However, the negative outlook on H&R Block reflects S&P's belief that management faces significant challenges in closing the Option One deal, the ratings service said.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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H&R Block draws over a billion in credit 