Aug. 22 (Bloomberg) -- H&R Block Inc., the biggest U.S. tax preparer, tapped bank credit lines twice in the past week after its usual sources of cash began drying up.

The company borrowed $200 million on Aug. 16 because turmoil in the credit markets left it unable to sell commercial paper, H&R Block said today in a statement. That loan was repaid on Aug. 20, when Kansas City, Missouri-based H&R Block drew an additional $850 million.

H&R Block's access to cash may remain limited because the commercial paper market has shut out mortgage companies and investors aren't buying the subprime home loans made by its Option One unit. Hedge fund manager Richard Breeden wants H&R Block to shut the money-losing unit sooner and put him on the board to help right the company.

``It's a little scary but not unique to H&R Block,'' said David Roberts, who helps manage about $18 million at Harvest Investment Advisors, including H&R Block shares. ``Credit has tightened for everyone The fact that they have the mortgage business and it's still not sold just adds salt to the wound.''

Institutional Shareholders Services, the biggest adviser to pension and mutual funds on shareholder votes, and California Public Employees' Retirement System, the nation's largest public pension fund, both endorsed Breeden's election bid today.

H&R Block fell 35 cents, or 1.8 percent, to $19.44 as of 4:22 p.m. on the New York Stock Exchange, leaving the shares down 16 percent this year.

Constrained Credit

``In recent weeks, the credit markets have become increasingly constrained and unstable,'' Chief Financial Officer William Trubeck said in the statement. ``As a result, we have decided to substitute this more stable source of funds to support our short-term needs.''

The company said it has $2 billion of credit lines that mature in 2010, more than it anticipates will be needed. Brian Levinson, a spokesman for H&R Block, declined to name the banks providing the lines of credit.

``It's more expensive to draw on these lines,'' said Christopher Wolfe, managing director at Fitch Ratings. ``Commercial paper is usually the most cost-effective and efficient way of financing a company's business.''

Breeden, the former chairman of the U.S. Securities and Exchange Commission, is putting pressure on Chief Executive Officer Mark Ernst to improve results after the shares dropped in two of the past three years. Breeden's Greenwich, Connecticut- based fund controlled about 2 percent of H&R Block's stock as of June, and it's trying to win three seats on the board of directors in a Sept. 6 election.

Gaining Support

Institutional Shareholder Services said the Breeden-led dissidents may help boost shareholder value. H&R Block said it was ``disappointed'' with the decision.

``If Option One isn't sold, management will come under a lot of pressure from shareholders to shut it down,'' said Roberts at Harvest Investment. ``They probably will bite the bullet and do that. Without Option One, the tax business is worth much more than where the share price is today.''

While Cerberus Capital Management LP has agreed to buy Option One, the sale may be delayed until December.

More than a dozen mortgage companies have gone bankrupt this year as lenders cut off credit lines and investors who bought the loans stopped bidding.

Late Payments

Overdue payments on subprime home loans, made to people with the worst credit ratings, rose to the highest since 2002 during the first quarter.

The biggest U.S. mortgage company, Countrywide Financial Corp., had to tap an $11.5 billion credit line in mid-August to stave off a cash shortage.

Accredited Home Lenders Holding Co., a San Diego-based subprime lender whose sale to Lone Star Funds collapsed, said today it will stop taking U.S. mortgage applications and cut operations, with 1,600 people losing their jobs. Lehman Brothers Holdings Inc., the biggest underwriter of U.S. bonds backed by mortgages, will close its subprime-lending unit and cut 1,200 employees. Delta Financial Corp., the subprime lender based in Woodbury, New York, is cutting 300 jobs.

Also today, Quality Home Loans, a California subprime lender, filed for bankruptcy. Amstar Mortgage Corp., a unit of Houston-based Amstar Financial Holdings Inc. said it will close.

To contact the reporter on this story: Rick Green in New York at Rgreen18@bloomberg.net.

Last Updated: August 22, 2007 17:34 EDT