on Thursday said it closed its deal to sell subprime lending unit Option One to a company owned by billionaire investor Wilbur Ross for $1.3 billion.
American Home Mortgage Servicing took over Option One effective Wednesday. The bulk of the proceeds, $980 million, will be used to repay the outstanding balance on H&R Block's servicing advance facility. That leaves the tax preparation services provider with $230 million in net cash proceeds.
"We are pleased to safely transfer the servicing responsibilities of Option One into the hands of a respected and responsible purchaser," H&R Block Chairman Richard Breeden said in a company statement. "More importantly, we delivered on the promise we made to shareholders to change the future course of our company. Today's transaction reduces risks and distractions from doing what we do best, which is serving the tax preparation needs of tens of millions of clients."
The company expects to retain a receivable relating to certain servicing assets of approximately $100 million, $57 million of which it anticipates receiving over the next 60 days. The balance represents a long-term receivable.
The company does not expect a significant increase or decrease in reported income. The company separately announced it had completed a repayment of its revolving committed line of credit from a syndicate of banks.
H&R Block shut down its mortgage origination activities last year after a deal to sell Option One to Cerberus Capital Management fell through. The market's appetite for mortgages soured last year, as the housing bubble burst and illiquid conditions in the credit markets lowered demand for securitized debt.
Large mortgage lenders such as
were forced to find a buyer in
Bank of America
was forced to raise capital and cut its dividend.
This article was written by a staff member of TheStreet.com.