Advanta has filed for bankruptcy

Jennifer McClelland | RSS | Mon, Nov 09 2009 | 1 Comment

Advanta Corp is a company that offers small businesses credit cards in the United States. Yesterday the lender filed for bankruptcy protection. The company, in its filing with the U.S. Bankruptcy Court for the Deleware District, listed assets of $363 million and debts totaling $331 million.

The company came into hardships after many of its small business clients simply could no longer afford to pay the balance or the minimum payment on credit cards lent by the company because they had also come under economic hardships. According to the company, it is trying to collect $2.7 billion from the accounts of 360,000 customers. The accounts are closed to new charges, but the outstanding balance is killing the company.

It had decided to shut down its credit card lending business five months ago to try to keep something like this, or worse, a takeover of its bank by the FDIC, from happening. however, it appears as though the bank will likely be taken over by the FDIC shortly because its level of capital is below regulatory requirements.

The company said that it has almost $100 million in cash and cash equivalents available, but would not be capable of meeting all of the debt obligations that will become due. There are around $138 million of senior retail investment notes still outstanding. The company’s largest unsecured debt holder is the Bank of New York Melton; it is investing in $230 million in debt for the lender.

Due to the announcement, of course, the stock for the publicly traded company fell 70%. It fell from 25 cents to 8 cents after hitting its all time low of just seven and a half cents.

Not included in the bankruptcy filing is Advanta Bank Corp. Also, customers who are making payments to their credit cards need to continue making payments on time because this has no effect on those accounts.

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Tags: minimum payment on credit cards, bankruptcy protection, bankruptcy filing