Block's IDR Downgraded

Citing the poor performance of Option One Mortgage Corp., Fitch Ratings has downgraded the long-term issuer default ratings of Block Financial Corp. and H&R Block Inc. from A to A-minus and placed them on Rating Watch Negative.In addition, Block Financial's short-term IDR was downgraded from F1 to F2, and its senior unsecured debt and commercial paper ratings were also downgraded. Fitch said the rating actions stemmed not only from the performance of Block's Option One subsidiary, but also from a shift in the rating agency's analytical focus from risk-adjusted capitalization to debt service and cash flow coverage. Option One's deteriorating performance led to a "significant increase" in debt and a decline in equity, Fitch said. It estimated that leverage had increased from about 1.3 times in fiscal 2006 to 2.6 times in fiscal 2007 and that debt-to-total-capitalization rose from 30% to 60% over the same period. Fitch can be found online at http://www.fitchratings.com.