Skip to comments.Advanta to cease new credit card lending(credit card crisis starting)
Posted on 05/13/2009 9:14:40 AM PDT by TigerLikesRooster
Advanta to cease new credit card lending
Advanta plans to cease new credit card lending as it battles losses; shares fall
On Tuesday May 12, 2009, 10:20 am EDT
SPRING HOUSE, Pa. (AP) -- Advanta Corp. said late Monday it will shut down its credit card lending operations next month as it battles surging loan losses.
Shares tumbled more than 6 percent, losing 7 cents to $1.06 in early trading Tuesday. Shares have dropped 88 percent over the past 12 months.
(Excerpt) Read more at finance.yahoo.com ...
Advanta Announces Plan to Maximize Capital and Dramatically Reduce Risk
SPRING HOUSE, Pa.—(BUSINESS WIRE)—Advanta Corp. (NASDAQ: ADVNB; ADVNA) today announced its Board of Directors has approved a plan designed to dramatically limit the Companys credit loss exposure and maximize its capital and its liquidity measures.
As a result of the deteriorating economic environment, the Company would expect the negative performance trends, if not abated with this plan, to result in losses that would erode its capital. Therefore, the Company envisions the following.
The Companys securitization trust will go into early amortization based on Mays performance. Early amortization will officially be determined on June 10.
Since the securitizations will not be permitted to fund new receivables after June 10, the Company will shut down all credit card accounts to future use at that time. Neither Advanta Bank Corp. nor any other Advanta-related entity will fund activity on its balance sheet from the accounts.
Therefore, the Company will not take any off-balance sheet receivables onto its balance sheet. Shutting down the accounts will not accelerate payments required from cardholders on existing balances.
In early amortization almost all of the receipts from cardholders are required to be paid to the securitization trusts noteholders and to the Companys sellers interest (its on-balance sheet share of the receivables). The securitization trusts notes are obligations of the trust and not of any Advanta entity. The Company is only at risk with respect to the off-balance sheet obligations to the extent of its residual interests.
Advanta Bank Corp. will use up to $1.4 billion to make a cash tender offer for Advanta Business Card Master Trust Class A senior notes at a price between 65% and 75% of their face value in a modified Dutch Auction.
Advanta Corp. will make a cash tender offer for any or all of the $100 million of 8.99% Capital Securities issued by Advanta Capital Trust I at 20% of their face value.
The Company will continue to service and collect the securitization trusts credit card receivables and its own receivables. This, along with taking appropriate actions to adjust expenses to be consistent with these activities, will be the Companys first priority. The Company will be free to do new business in the future to the extent it chooses, but it does not expect to do so in a significant way until implementation of the plan is well under way.
Advanta Corp.s senior retail investment notes are unlimited obligations of Advanta Corp. and will remain outstanding and continue to be issued in the ordinary course. The benefits of the plan to the Company are designed to benefit the senior retail note program holders as well as the Companys shareholders.
The Company previously disclosed that it expected to use tools at its disposal to avoid early amortization of the securitization trust unless it concluded there was a better plan to maximize its capital and liquidity. The Company has now concluded that the plan outlined here is that better plan.
Cash Tender Offers Details
The Advanta Business Card Master Trust Class A senior notes (the ABCMT Notes) tender offer will use a modified Dutch Auction process. Holders who elect to participate in the ABCMT Notes tender will receive between $650 and $730 for each $1,000 of face value of notes validly tendered plus accrued and unpaid interest. In addition, an Early Participation Payment of $20 for each $1,000 of face value of notes will be made if the ABCMT Notes are validly tendered on or before the Early Participation Date. Advanta Bank Corp. will use up to $1.4 billion of its liquidity to complete this transaction. The cash tender offer is being made on additional terms and conditions which are set forth in an offer to purchase dated May 11, 2009 and the related letter of transmittal, both of which are being sent to holders of the ABCMT Notes. The offer will expire at 5:00 pm EDT on Wednesday, June 10, 2009, unless extended or terminated earlier (the Notes Expiration Time), with an Early Participation Date of Wednesday, May 27, 2009 at 5:00 pm EDT. Any tendered ABCMT Notes may be withdrawn prior to, but not after, the Early Participation Date and withdrawn ABCMT Notes may be re-tendered by a holder at any time prior to the Notes Expiration Time.
The Advanta Capital Trust I 8.99% Capital Securities (the Capital Securities) tender offer is for any and all of the $100 million of outstanding securities. Holders who elect to participate in the Capital Securities tender will receive $200 for each $1,000 principal amount of validly tendered securities. The cash tender offer is being made on additional terms and conditions which are set forth in an offer to purchase dated May 11, 2009 and the related letter of transmittal, both of which are being sent to holders of the Capital Securities. The offer will expire at 5:00 pm EDT on Wednesday, June 10, 2009, unless extended or terminated earlier (the Securities Expiration Time). Any tendered Capital Securities may be withdrawn prior to, but not after, the Securities Expiration Time and withdrawn Capital Securities may be re-tendered by a holder at any time prior to the Securities Expiration Time.
Copies of the offers to purchase the Capital Securities and the ABCMT Notes and the related letters of transmittal may be obtained from the Information Agent for the offer, Global Bondholder Services Corporation. Sandler, ONeill + Partners, L.P. will be acting as the sole dealer manager for both cash tender offers.
Advanta is one of the nations largest credit card providers (through Advanta Bank Corp.) in the small business market today. Advantas exclusive focus on this market as well as its size, experience, and service tailored to the needs of small businesses differentiates the company from other credit card companies. Founded in 1951, Advanta has long been an innovator in developing and introducing many of the marketing techniques that are common in the financial services industry today. Learn more about Advanta at www.advanta.com.
This Press Release contains forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ from those projected. The most significant of these risks and uncertainties are: (1) factors affecting plans to maximize the Companys capital and its liquidity measures, including factors impacting the successful execution and completion of the tender offers for the trust preferred securities and the AdvantaSeries securitization notes; and (2) the impact of any legal, regulatory, administrative or other proceedings. Additional risks that may affect the Companys future performance are detailed in the Companys filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.
If your credit card company cuts credit limits in half, as Bank of America did in order to lessen its liabilities for the Treasury’s stress test, your credit score goes down. If you pay off your cards and close your accounts, your credit score goes down. It’s time consumers boycott the credit card companies. The system is too broken to fix.
My wife runs a small business and had an account with this outfit. According to her contract, he was guaranteed a fixed (not teaser) rate of 7.9%, based upon her good credit record. For two years, she managed the account very well with no problems, but in September of last year, Advanta suddenly hiked her rate (without the legally required opt-out notice) to 37%. Swift phone calls to India revealed that it was an across the board rate increase based merely "on the current state of the economy" and nothing else. Her fine credit record be damned.
Turns out that she was by no means alone. Thousands of other small business owners got hit as well. Fortunately, our credit was excellent and I was able to help her transfer her balance to another account, and we told Advanta to go to hell.
Just do a google search on "Advanta" and "fraud" and you will find thousands of complaints.
Yeah! I got a nasty shock trying to refinance the house after paying off all but the last one. The lender gave me two new credit cards (which I've never used) to help me get it back up, and told me to re-apply in a few months.
However, Advanta's management has breached that contract in the worst possible way with thousands of its customers, and it is about to get massively sued. The FDIC is actually investigating the company, and probably will take some sort of action.
I'm plugged into the screwed-Advanta customer network, and right now, the company is trying to have it both ways, by claiming to be a small business credit card bank, while insisting that it bases its decisions on the personal credit scores of the business owners. That's illegal, and they're in trouble for it. The company's also been using illegal debt collection methods against those customers who got screwed and could not make the payments at 35%-40% rates. The feds are investigating Advanta for that too.
Crooked all the way around!
I have the US Air card with BOA, luckily US Air is dropping BOA to go with a different bank..
Request that they underwrite your mortgage the OLD FASHIONED WAY without the non-thinking computer-— or find someone who will! Check out DaveRamsey.com
Thanks for the ping.
Thanks for an important reply...