Saturday, September 20, 2014
Inquirer Daily News

Advanta blows up; are credit cards doomed?

Advanta Corp., the Spring House credit card company, is cancelling users' credit cards and paying some of its bond investors at a steep discount as it tries to conserve cash.

Advanta blows up; are credit cards doomed?

Advanta Corp., the Spring House credit card company, is cancelling users' credit cards and paying some of its bond investors at a steep discount as it tries to conserve cash. Release here.

Bad news for bondholders:  "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"

NEW: Is Advanta just the first card issuer to blow up? Says veteran card executive Jim Shanahan, ceo at prepaid-card provider Maverick Network Solutions in Wilmington: 

  "In this environment, there was no exit for Advanta. (Ceo) Dennis Alter would have sold it if he could. He had to shut it down.
  "Advanta's a nationally visible brand. It's going to be seen as a leading indicator. The first one to fall.
  "The industry is looking at charge-offs (bad loans) above 20 percent." That's what Treasury assumed when it stress-tested the banks. "Last time charge-offs peaked at 10 percent. It was like, 'Big, deal, we'll bounce back.' But if 20 percent is true, this is uncharted.
  "Even (JPMorgan Chase & Co. ceo) Jamie Dimon was quoted saying credit cards are 'a conundrum.' If even Jamie Dimon can't see how to solve it, I'm glad we're in the prepaid business."

About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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