Moody's downgrades Block

Moody's Investors Service said it downgraded to Baa1 from A3 its rating on the senior debt of Block Financial Corp., a wholly owned guaranteed funding subsidiary of H&R Block.

The outlook remains negative.

According to Moody's, this rating action reflects continued dislocation in the U.S. single-family mortgage market, particularly in the subprime space, which raises concerns about the prospects of the sale of Option One business to Cerberus Capital Management.

"The sale of Option One and the amount of the associated proceeds, are uncertain due to adverse mortgage market conditions," said Brian Harris, senior vice president in real estate finance at Moody's.

"In Moody's view, the increased likelihood that H&R Block would not be able to sell its nonprime mortgage finance business could increase volatility in H&R Block's business and hinder the company from focusing on its successful, core tax business."

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