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Monday, November 9, 2009

Advanta bankrupt; FDIC may take bank

Credit card lender Advanta Corp. of Spring House on Sunday filed a voluntary petition for reorganization under Chapter 11 of the US bankruptcy code. The case was filed a federal bankruptcy court in Wilmington, DE: 09-13931, before Judge Kevin Carey.

Advanta said in this statement it has "close to $100 million in cash" on hand, which "over time will not be enough" to pay all it owes, which includes "$138 million of senior retail investment notes outstanding." Bankruptcy "will, among other things, maximize recoveries of the senior retail note holders." Which doesn't mean they'll get all they're owed.

Banks don't go bankrupt - they get taken over by the Federal Deposit Insurance Corp. Advanta's bank unit, Advanta Bank Corp, with $2.7 billion in old loans from 360,000, isn't part of the bankruptcy filing. Instead, it faces a possible FDIC takeover: The company failed to get final FDIC approval for two reorganization plans earlier this year, doesn't have enough capital to meet federal guidelines, and "may be turned over to an FDIC receivership." 

Advanta formerly employed over 1,000 at sites in Pennsylvania, Delaware, New Jersey, California and other states, but shrank to under 200 earlier this year as loan losses mounted and it stopped making new loans. More than 100 U.S. banks have failed so far this year.

For more information, Advanta has set up a toll-free number: 1-800-223-7074 and Web site: www.advantareorg.com.

Advanta President Bill Rosoff tells what went wrong in a court filing here; Advanta lists its debtors, including lender trustee Bank of New York Mellon Corp., plus local and national vendors (including a jet service) of which the largest are owed hundreds of thousands, in its bankruptcy petition here. 

 
Posted by Joseph N. DiStefano @ 10:16 AM  Permalink | 7 comments
Comments   
  • 0 like this / 0 don't   •   Posted 10:04 AM, 11/09/2009
    That's funny! The FDIC is bankrupt too! The taxpayers take will take another bath!
    — hexyscores
  • 0 like this / 0 don't   •   Posted 10:12 AM, 11/09/2009
    The FDIC has piles of money. They're asking the banks for more, tho Reagan's ex-FDIC chief, Bill Isaac, has said (in my column, among other places) that FDIC doesn't really need more. Might have been different if they'd let Citi, Wachovia, etc. fail sted of propping them up.
    — distefj
  • Comment removed.
  • 0 like this / 0 don't   •   Posted 11:26 AM, 11/09/2009
    Lotta, if you're right about the dollar, you might not have to worry about manufacturing going away anymore, cause as the dollar gets weaker more factories are gonna find it attractive to move back to the U.S. Maybe even some from China, where the legal system is notoriously unhelpful, if you happen to be an independent capitalist or an investor.
    — distefj
  • 0 like this / 0 don't   •   Posted 12:34 PM, 11/09/2009
    The FDIC has piles of money printed out of thin air by the Fed, and what does it cover - a couple of percent of all deposits nationwide? All the FDIC does is create moral hazard.
    — kingnutter
  • 0 like this / 0 don't   •   Posted 1:44 PM, 11/09/2009
    So, Monopoly money to pay Monopoly losses?
    — distefj
  • 0 like this / 0 don't   •   Posted 6:16 PM, 11/09/2009
    And who exactly are these manufacturers going to sell their goods to? The disappearing american middle-class consumer? The FDIC isn't bankrupt but we had to bailout a bunch of banks because they were too big to fail? Sure, if we give the banks trillions and they don't get taken over by the FDIC, the FDIC has sufficient funds. Wacky. Not that FDIC funding could or should have ever saved the day anyway.
    — MikeP


7 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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