Update – H & R Block – Liquidity Taxed

Breeden Wins! Now he’s got to deliver.

Breeden to join board of H&R Block
Richard Breeden, the former SEC Chairman turned hedge fund manager, has won his proxy contest against the management of tax preparer H&R Block.

While official tallies of the shareholder vote have yet to be confirmed, it appears that Mr. Breeden and two other candidates nominated by Breeden Capital Management, Robert Gerard and Edward Shaw Jr., were overwhelmingly elected to sit on the 11-member board.

“This is the dawn of a new era for H&R Block,” Mr. Breeden told shareholders at the company’s annual meeting yesterday in Kansas City. “There won’t always be unanimity of opinion on the board, but I hope there will always be unity of purpose.”************************************************************************************
It seems H&R Block had to tap their credit lines for $1.05 billion to “provide a more stable source of funds to support its short term needs.”

H&R Block Taps Reserve Credit Lines

“H&R Block Inc. became the latest company forced from the storm-tossed market for commercial paper, tapping $850 million under existing backup bank credit lines to replace the short-term debt as it comes due.

The action by the Kansas City, Mo., company, which provides tax-preparation and financial services, shows how the debt-market turmoil is placing extra credit demands on banks as numerous issuers with mortgage exposure find themselves unable to borrow the funds they need in the commercial-paper market.”

I thought their line was expired… What’s the real reason they’re having liquidity problems? Well, I said they were shaky. Does Breeden still want in? Hold tight. It’s going to be a bumpy ride.

From my prior post about Breeden, KPMG and H&R Block:
7/29 Update
As I suspected they would, the Justice Department has told H&R Block management to “go pound salt.” They should have hired me. I could have told them there was no merit in this complaint before they wasted their money on lawyers. Who are their lawyers anyway… Another example of why Breeden is needed. These guys are wasting their shareholders’ money. And, after all, these are the tax guys that didn’t handle their own tax issues correctly!And they’ve also had the deal to scuttle their sub-prime mortgage business collapse because their credit line expired. Others are also coming due and their credit situation is deteriorating. Remember, cash flow issues are a result, not a cause in and of itself, of other financial issues, primarily lack of confidence by the lenders in a company that keeps getting itself into trouble… PwC decided to get out early for a change. They resigned. How could that have been a “planned transition?”. Was KPMG an “auditor in waiting?”

2 replies
  1. robert
    robert says:

    One of the ways this creates some concerns from my view is that that H&R Block also owns a major CPA firm- RSM Mcgladrey, which in turn owns a large local NYC firm Goldstein Golub and Kessler which they fairly recently acquired. GGK as they are known, was formerly owned by American Express in what was one of the first CPA merger and acquisition deals involving a non
    CPA firm. What does all this mean in the public accounting arena. I really don’t know for sure, but can see some possible ripple effects such as clients, partners and staff of the accounting firm feeling some uncertainty about the future as well as a skeptical eye being shown to future CPA firm deals with non CPA parent companies . Please visit my blog at http://rf-resources.com/index.php?/site/blog/

  2. Anonymous
    Anonymous says:

    That is a good point, but my guess is only beneficial to RSM. If H & R has to sell assets, it may give the partner equivalents the ability to buy back there practice on the cheap. In my mind, I cant figure out who would buy these practices. The assets are the people and the clients. They really cant be bought and sold. This may be a golden opportunity for them.

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