Friday, July 31, 2015

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?

0 comments

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."

0 comments
We encourage respectful comments but reserve the right to delete anything that doesn't contribute to an engaging dialogue.
Help us moderate this thread by flagging comments that violate our guidelines.

Comment policy:

Philly.com comments are intended to be civil, friendly conversations. Please treat other participants with respect and in a way that you would want to be treated. You are responsible for what you say. And please, stay on topic. If you see an objectionable post, please report it to us using the "Report Abuse" option.

Please note that comments are monitored by Philly.com staff. We reserve the right at all times to remove any information or materials that are unlawful, threatening, abusive, libelous, defamatory, obscene, vulgar, pornographic, profane, indecent or otherwise objectionable. Personal attacks, especially on other participants, are not permitted. We reserve the right to permanently block any user who violates these terms and conditions.

Additionally comments that are long, have multiple paragraph breaks, include code, or include hyperlinks may not be posted.

Read 0 comments
 
comments powered by Disqus
About this blog

PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, distefano251@gmail.com, 215.854.5194 or 302.652.2004.

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

Joseph N. DiStefano
Also on Philly.com:
letter icon Newsletter