Option One Mortgage, the beleaguered subprime-lending arm of H&R Block , will receive an additional $350 million in funding from Greenwich Capital Financial Products. According to a filing with the Securities and Exchange Commission, Greenwich is providing the division with financing through October 1, 2008, with an augmented credit capacity of $750 million up from $400 million. Option One cancelled a warehouse credit line with Greenwich worth $750 million to fund mortgage loan origination after mortgage-origination volume dropped notably.
Additionally, the filing revealed that HRB's Block Financial Unit drew $100 million through commercial credit lines, bringing the unit's total outstanding amount to $1.725 billion. HRB also amended the division's 2 commercial credit lines to decrease the minimum net worth it must maintain in order to avoid default.
HRB has been negotiating the sale of its Option One unit with Cerberus Capital Management since April. Shares of the tax-preparation firm are up fractionally in mid-morning trading. Meanwhile, option traders seem skeptical that the stock can reverse its downtrend. The Schaeffer's put/call open interest ratio checks in at a sizable 2.76, which ranks higher than 89% of other such readings taken in the past year.