November 9, 2009
-
News: Advanta Files Bankruptcy
Advanta Corp's effort to cut expenses and reduce risks to avoid bankruptcy has been fruitless. The lender announced on Sunday that it filed for a voluntary petition for reorganization in a U.S. Bankruptcy court on. At one time, Advanta was one of the nation's largest small business credit card providers. However, when the company made the decision to put their securitization into early amortization, the securitization would not allow new receivables. Advanta had no choice but to shut down all credit card accounts to future use. By shutting down the small business credit card accounts, the lender had hoped to prevent further erosion of its capital. In his statement, Dennis Alter, Chairman and Chief Executive Officer of Advanta said “The economic debacle over the last two years devastated Advanta's small business customers and Advanta itself."
In the filing, the company indicated that it has nearly $100 million in cash, however, has $138 million in liabilities. Although the lender shut down all small business credit cards to future use last May, it did not accelerated cardholders' payment. There remains $2.7 billion in the portfolio of managed receivable and the company has continued to collect on these existing balances. Advanta Bank Corp, a subsidiary of Advanta Corp., is not listed as being included in the bankruptcy reorganization; however, the company did indicate that they are looking at all current businesses plus some new possibilities. No mention was made whether or not plans include the start up of future small business credit cards. The existing accounts will not be affected and customers will be required to pay as agreed.
Advanta Corp was founded in 1951 by Jack Alter with a vision in helping teachers. The company was originally called TSO Financial. Mr. Alter ran his new business out of a spare room from his home. After an acquisition of Colonial National Bank, the company began marketing credit cards to the general public. In 1985, TSO Financial went public and three years later changed its name to Advanta. They soon expanded their product line to include mortgages and meeting the needs of small businesses. They quickly grew to become the sixth largest provider of consumer cards. During the past ten years, Advanta's main focus and core strength has been in servicing more than a million small business accounts.