Small business credit card lender to close all accounts
by Associated Press
Tuesday May 12, 2009, 4:44 PM
NEW YORK -- Advanta Corp., a credit card lender to nearly 1 million small businesses, will close all its cardholders' accounts next month in a last-ditch effort stem losses.
Analysts said the move adds to already growing concerns that the company might not be able to survive. And while other credit card issuers won't likely fall into Advanta's situation, analysts said, worries remain that they might decide to cut credit lines further on small businesses.
"Advanta's problems call into question the business model at the end of the day," said Keefe, Bruyette & Woods card industry analyst Sameer Gokhale. "Are these really small business cards, or just consumer cards with really high credit lines?"
As of late March, Advanta wrote off about a fifth of its credit card debt as unrecoverable.
In anticipation of losses escalating further, Advanta said late Monday that on June 10 it will shut down all accounts. June 10 is when Advanta will offer to pay off investors who hold securities back by its cards -- a type of payout known as an "early amortization" of a trust. This way, Advanta said, the company can "maximize its capital and its liquidity measures."
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