Aug. 30 (Bloomberg) -- H&R Block Inc., the biggest U.S. tax- preparer, said first-quarter losses more than doubled on costs to finance its money-losing subprime mortgage unit.

The net loss for the fiscal quarter, which ended July 31, was $302.6 million, or 93 cents a share, compared with $131.4 million, or 41 cents, a year earlier, Kansas City, Missouri-based H&R Block said today in a statement. Losses excluding the mortgage unit were 34 cents a share, in line with the 35-cent average of seven analyst estimates compiled by Bloomberg.

Chief Executive Officer Mark Ernst agreed in April to sell Option One Mortgage Corp. to hedge-fund manager Cerberus Capital Management LP. Under the terms of the sale, which earlier this month was pushed back two months to December, H&R Block has to keep the unit running with cash infusions until the deal closes.

``Option One's bleeding won't stop until it's sold or shut down,'' said Scott Schneeberger, an analyst at CIBC World Markets Inc. in New York who has a ``sector perform'' rating on the stock. ``It would be better if they completed the sale urgently, forgoing the expectation of receiving any money for it.''

Possible revisions to the sale agreement are being negotiated with Cerberus, H&R Block said today. The firm is asking Cerberus to waive a condition that requires Option One to have $2 billion in loans at closing time and $8 billion of credit lines. H&R Block would close down the mortgage unit's origination platform, and Cerberus would only purchase the loan servicing capabilities of the unit, the company said.

Shares Decline

Shares of H&R Block have lost 15 percent this year as mortgage losses offset rising income from the tax business. Hedge fund manager Richard Breeden is running for the H&R Block board, accusing management of failing to do enough to reverse the share price decline. Board elections will take place during the annual shareholders' meeting next week.

Discontinued operations, which include the mortgage unit being sold, had a net loss of $192.8 million in the quarter, the company said. Option One, based in Irvine, California, was the nation's eighth-biggest seller last year of subprime mortgages, which are offered to people with the worst credit records. Such loans typically default about six times more often than conventional mortgages.

Revenue from continuing operations, which excludes Option One, rose 11 percent to $381.2 million, the company said. The tax services unit lost 172.2 million in the quarter. H&R Block typically loses money in the first half of its fiscal year before the U.S. tax season starts.

To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net.

Last Updated: August 30, 2007 06:17 EDT