H&R Block, Inc. said this morning that its deal to sell troubled subprime lender Option One Mortgage Corporation to private equity firm Cerberus Capital Management, L.P. has fallen apart. From the press statement:
Throughout recent months, the Company and Cerberus worked to identify mutually acceptable alternatives for restructuring the April Agreement in light of the widespread changes in mortgage market conditions and the substantial reduction in new lending by OOMC. These discussions did not lead to a mutually acceptable agreement, and the Company and Cerberus have agreed to terminate the April Agreement. Under the termination agreement each party will bear its own costs in connection with the proposed transaction, and the parties exchanged mutual releases.
Option One had already essentially ceased all new lending activities, H&R Block said -- and the company said it will now shutter any remaining origination activities, costing 620 employees their jobs as the company closes three offices and absorbs a restructuring charge of $75 million. The company did not specify any severance or health care packages. The company's servicing book is now up for bid as well, H&R Block said, and said it expects an asset impairment charge of $125 million surrounding the value of Option One's servicing business. To guide the sale of the servicing platform, Fabiola Camperi has been named president at Option One. Ms. Camperi was previous the as executive vice president of operations, where she had been responsible for production and servicing. "We intend to focus on running the servicing operation efficiently while pursuing an orderly sale of our servicing activities," said interim CEO Alan Bennett.