May 18, 2009
-
News: Advanta CC Update
Advanta continues to monitor its financial securities and decision to shut down all of its business credit card accounts to future use as reported in their regulatory filing today. The move to shut the accounts down was made earlier this month to protect investors from a deteriorating performance of receivables. The decision appears to be an attempt at keeping the company afloat in the wake of suffering a massive drop in stock prices due to rising delinquencies. The decline in receivables meant less money for investors. The company’s plan to move its securitization trust into early amortization to accelerate payment to investors, left Advanta hanging with no way to fund their small business credit card business. The only alternative was to shut the cards down to future use. Not very good news for the small business credit card owners who now have the task of securing a new card from another lender to fund their businesses.
The report indicates that approximately one-third of Advanta’s small business credit card customers paid their balances off in full for the first four months of 2009. The total amount of card payments accounts for over 68% of the total four month receivables. Nearly 40% of their customers paid more than the minimum payment due and over 12% paid the minimum payment due. Lastly, approximately 13% did not make the minimum payment. According to Advanta, the trusts receivables balance was $4.5 billion at the end of April. Furthermore, the company’s credit card default rate rose to 20.15% in April compared to 17.31% in March. Delinquent accounts of 90 days or more remained constant at 6% of April’s total receivables. Accounts delinquent 30 days or more had a moderate drop of 11.54% for April from 11.92% percent in March.
The move to shut down Advanta’s business credit card accounts came as no surprise as evidenced by a loss of investor confidence when stocks dropped drastically earlier this year. The company’s stock which at one time sold for $30 a share in 2007 dropped to a devastating low of 32 cents. The day before Advanta made the announcement to shut down the cards, stock closed at $1.55. Within the week, stock dropped to 60 cents a share.