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Wednesday, January 21, 2009

Advanta still has moves left, says CFO Browne

Just last fall, Advanta Corp. was weighing a new $50 million Montgomery County headquarters. Just this month, Temple University opened a new Fox School of Business building named for Advanta's founding family, the Alters.

But today, Advanta Class A stock is trading at 67 cents -- a 20-year low. Class A is at 85 cents -- an alltime low. As PhillyDeals noted today, Stifel Nicolaus & Co. today switched its Advanta rating to "sell" from "buy," because Advanta "will no longer be able to survive" higher loan losses, higher finance costs, and falling revenues. At these rates, Stifel worries Advanta will be forced it to pay back its debt early -- and it doesn't have enough cash.

I asked Advanta chief financial officer Phil Browne if the squeeze will force Advanta to pay its bonds back early. "I think it’s not only avoidable but unlikely," he said. Yes, loan losses are up, partly because Advanta isn't growing its loan portfolio with new customers. But the company can still boost interest charges for many of its existing customers, which means revenues might still keep pace with losses: "We still have some repricing options." And it can change the mix of debt that backs investors' bonds, so it doesn't trigger early-repayment threshholds.

Advanta could also cut its dividend -- which costs nearly $40 million a year -- though Browne wasn't suggesting that. The company will put out its 2008 earnings later this month or early in February.

 
Posted by Joseph N. DiStefano @ 1:17 PM  Permalink | 3 comments
Comments   
  • 0 like this / 0 don't   •   Posted 8:56 PM, 01/22/2009
    Google Advanta complaints and I think you'll find it very interesting that Advanta is jacking interest rates on hundreds of it's small business owners to as high as 40%. It appears to be for anyone carrying a balance, because almost every one has excellent credit, high FICO scores, never late on a payment and it appears that over 300 small business owners have not received an Opt Out notice that Advanta claims they sent them before raising their rates. It is unfortunate if they go bankrupt, but there will be hundreds of their loyal small business card holders who will have a large smile on their face if they do. Hopefully a few class action lawsuits will help them along.
    — dec458
  • 0 like this / 0 don't   •   Posted 4:11 PM, 01/24/2009
    As an Advanta cardholder, I must say I have been around a while, and have had many credit cards, and do own my own business. But Advanta takes the cake when it comes to taking advantage of its cardholders. I have a small construction firm in South Jersey, currently all five employees are on unemployment, due to the harsh economic conditions. Rather than close my business down and claim Chapter 11, I have decided, to put my feet hard to the ground and fight I have contacted all of my creditors, and rather than not pay them, I worked out agreements with them, and told them I would rather they get paid back, but over time, rather then me go bellyup. All agreed, except Advanta, whose obnoxious 34.99 rate is rediculous, they won't budge and told me they may raise my rate higher. I belong to a South Jersey Remodelers Chapter, and several other colleagues, have the exact same story. I cannot believe that in these turmoiled times, and even their own stock taking the hit it is, they are the typical hardnosed bankers, that only know one word, "NO". That will more than likely put them under, especially during these rough times. If I were to challenge Advanta, as to who will be around longer, I would put my money on my onself.
    — gary chowansky
  • 0 like this / 0 don't   •   Posted 12:01 AM, 04/11/2009
    I have an Advanta card and got this card with 7.99% interest. I have top credit and never have been late. I always pay more than what is due, and being I am self employed I use that card to make a quick purchase while on the job if needed and I use it for convenience. I got my new statement and according to all the complaints I have read I must be pretty lucky...they "only" raised me to 17.99%.....I called and spoke to someone in India who told me that they "reviewed" my credit and that they determined I was a high risk. I was floored. I told them what I said beforehand, and they agreed with me. So when they did I asked, why did you increase my interest rate? I was told the same line..this is a National & Business disgrace. It appears to me that Advanta took alot of time investigating how to circumvent the Fair Credit Act. I know in NY the criminal usury rate is 25%. I know of many in NY where the interest rates have hit 32% and even 37.9%. How they get away with this bait and switch technique is beyond me. What happened to good business practices? I am waiting for a class action lawsuit, I dont care how long it will take, and I dont care what I have to do to put in my 2 cents to bring Advanta down. I think that if you are going to deal with America's Small Businesses that you at least service those businesses with people who speak English and know how to conduct customer service. Its amazing that a company like Advanta, in these hard times would stoop so low as to destroy the very heart of the American Economy, which we all know is the Small Business. Shame on Advanta.....They lied and never sent me a letter. They insist they did, but I find it strange that thousands of small business ownes say the same thing...we never got a notice. We must be scripting our story lines too. Hmmmmmm
    — theElectrician


3 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column in the Philadelphia Inquirer. Joe has been a member of Bloomberg LP’s New York Finance Team, wrote the book “Comcasted,” taught writing at St. Joseph’s University, and studied economics and history at Penn. Reach Joe at 215-854-5194 and JoeD@phillynews.com
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