H&R Block subprime unit gets $350 million funding

NEW YORK (Reuters) - H&R Block Inc (HRB.N), the largest U.S. tax preparer, on Friday said the subprime lending unit it is trying to sell has obtained $350 million of new funding capacity from a unit of Royal Bank of Scotland Group Plc (RBS.L).

In a U.S. Securities and Exchange Commission filing, H&R Block said Option One Mortgage Corp obtained the funding from Greenwich Capital Financial Products Inc on November 16. The increase boosts the sum available under a credit facility to $750 million from $400 million.

Separately, H&R Block said its Block Financial Corp unit on November 20 drew down $100 million from two credit lines, giving it $1.725 billion out of a possible $2 billion outstanding. It was at least the fifth drawdown since mid-August.

H&R Block also said Block Financial on November 19 arranged to amend the credit lines to reduce the minimum net worth it needs to maintain without risking possible default, and to pay down some borrowings if Option One were not sold by January 31, 2008.

Kansas City, Missouri-based H&R Block on November 20 replaced Chairman and Chief Executive Mark Ernst after mounting losses from subprime mortgages, which go to people with poor credit.

Richard Breeden, an activist investor and former U.S. Securities and Exchange Commission chairman, was named chairman. A search has begun for a permanent chief executive. Breeden has said he wants H&R Block to quit subprime lending and other businesses unrelated to tax preparation.

H&R Block agreed in April to sell Irvine, California-based Option One to private equity firm Cerberus Capital Management LP CBS.UL, but that agreement fell apart. The company has said it wants to preserve a sale of at least part of the unit.

Shares of H&R Block closed Wednesday at $19.00 on the New York Stock Exchange. They began the year at $23.04. U.S. stock markets were closed Thursday for the Thanksgiving Day holiday.

(Reporting by Jonathan Stempel; Editing by Gerald E. McCormick)