In an SEC filing this morning, H&R Block -- parent of troubled subprime lender Option One Mortgage Company -- said it had drawn $250 million against an available $2.0 billion in credit, and cited instability in the commercial paper market as they key reason for the draw. From the filing (emphasis added):
On September 24, 2007, BFC drew a combined $250.0 million under the BFC Credit Facilities. The draws provide a more stable source of funds to support BFC's short-term needs in light of recent market conditions that have negatively impacted the availability and term of commercial paper. ... The amounts to be borrowed under the BFC Credit Facilities become due and payable on August 10, 2010.
H&R Block has been trying to sell its subprime mortgage unit Option One, and in April said it had found a buyer in private equity firm Cerberus Capital Management, LP for an estimated $970 million. Since that time, the deal has been thrown into question -- with H&R Block saying recently that the proposed sale was in doubt due to an inability to meet closing conditions set forth in the purchase agreement. The company recently laid off an additional 575 employees earlier this month as questions remained over H&R Block's ability to sell the troubled subprime lender. Cerberus' intentions on the proposed deal have not been made public, although the private equity investor has watched two of its other mortgage investments go sour in recent months. In mid-August, Cerberus-owned Aegis Mortgage filed for bankruptcy amid a growing industry liquidity crisis; the same week, another Cerberus business, Residential Capital LLC, saw its debt rating cut to junk status by Fitch Ratings.