Cerberus Subprime Deal On The (Credit) Line

Jul 6 2007 | 11:16am ET

Cerberus Capital Management’s deal for a subprime mortgage lender may be in jeopardy after Lehman Brothers cut off a $1.5 billion line of credit.

Lehman Brothers’ decision not to renew the warehouse credit facility leaves Option One, currently owned by H&R Block, with just $8 billion in committed lines of credit. That was the minimum level set by Cerberus when it agreed to pay roughly $800 million for the lender in April. And waivers on $3.75 billion in additional credit lines—necessary because in-the-red Option One has been in violation of minimum-income requirements—are due to expire this month, including Citi’s $1.5 billion commitment.

One bright spot was Bank of America’s decision to boost its warehouse line by $250 million, after slashing it from $4 billion to $2 billion in May. The credit increase will last until the sale is closed, which is expected to occur in October.

H&R Block said “the company is managing its total warehouse lines to the $8 billion level, and we are confident that we have the current and potential lending relationships to maintain at least this amount in place through the closing of the Option One sale.”

“It wouldn’t make sense for us to spend money to maintain greater warehouse capacity than required,” the company said.


In Depth

Israeli Hedge Fund Harnesses Big Data

Jul 28 2014 | 8:10am ET

Apica Green is a multi-million dollar Israeli hedge fund that is based in Tel Aviv...

Lifestyle

David Yarrow On Growing His Hedge Fund And Shooting The Animals And People Of Africa - As A Photographer

Jul 23 2014 | 6:44am ET

While he’s always been a photographer, recent expeditions to Iceland, Ethiopia...

Guest Contributor

Why Is The Shipping Industry Underwater?

Jul 31 2014 | 7:31am ET

Anyone who’s taken a look at the global shipping industry recently probably knows...

 

Publisher's Note