H&R Block is selling its money-losing subprime mortgage unit to Cerberus Capital Management for about 40 percent less than it was originally seeking.

"Given the significant changes in the subprime market, we're pleased with the outcome," Chief Executive Officer Mark Ernst told Bloomberg. After a six-month search, Cerberus, a private equity and hedge fund management firm, will pay as much as $800 million for the subprime mortgage unit, Option One Mortgage, according to one analyst's estimates. H&R Block said Cerberus would pay $300 million less than that estimate.

The company will take a pretax charge of as much as $320 million to reflect the lower value of the assets, and the impairment charges are expect to result in a fiscal 2007 net loss.

H&R Block bought Option One for $218 million in 1997 from Fleet Financial Group, now a part of Bank of America Corp.

Recently, the U.S. housing market boom led to a surge in the number of subprime borrowers. As defaults on subprime mortgages rose to the highest level in four years, Option One's value plummeted. While the price of the deal isn't clear yet, investors should still be happy enough that H&R is getting rid of the mortgage group.

H&R Block Inc., the largest U.S. tax preparer, said it found a buyer for its money-losing subprime mortgage unit after a six-month search and will sell the business for about 40 percent less than it sought.

Cerberus Capital Management LP, a New York-based manager of private equity and hedge funds, will pay as much as $800 million for Option One Mortgage Corp., according to calculations by UBS AG analyst Kelly Flynn. H&R Block today reduced the value of Option One's tangible net assets, a measure of the unit's liquidation value, and said Cerberus would pay $300 million less than that amount.

(Continue reading this story on Bloomberg)

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