Advanta begins tender offer for 8.99% capital securities under plan to maximize liquidity

By Angela McDaniels

Tacoma, Wash., May 11 - Advanta Corp. has begun a tender offer for Advanta Capital Trust I's $100 million 8.99% capital securities as part of plans designed to limit the company's credit loss exposure and maximize its capital and liquidity measures.

Holders who tender will receive 20% of par, and the offer will expire at 5 p.m. ET on June 10, according to a company news release.

Advanta said that because of the deteriorating economic environment, it expects its negative performance trends to result in losses that will erode its capital unless it executes the plan.

Also under the plan, Advanta Bank Corp. will use up to $1.4 billion to make a cash tender offer for Advanta Business Card Master Trust's class A senior notes at a price between 65 and 75 in a modified Dutch Auction. This offer will also expire on June 10.

The company's securitization trust will go into early amortization. Advanta said that in early amortization, almost all of the receipts from cardholders are required to be paid to the securitization trust's noteholders and to the company's seller's interest, meaning its on-balance sheet share of the receivables.

The securitization trust will go into early amortization based on May's performance, and early amortization will officially be determined on June 10

Because the securitizations will not be allowed to fund new receivables after June 10, the company will shut down all credit card accounts to future use at that time.

Advanta's senior retail investment notes will remain outstanding and continue to be issued in the ordinary course.

Little new business

The company will continue to service and collect the securitization trust's credit card receivables and its own receivables. Advanta said this, along with taking actions to adjust expenses, will be its first priority.

The company will be free to do new business in the future but does not expect to do so in a significant way until the plan is well under way, according to the release.

The dealer manager for the tender offers is Sandler, O'Neill + Partners, LP (contact Katherine Orr at 866 805-4128 or 212 466-8038), and the information agent is Global Bondholder Services Corp. (866 470-4200).

Spring House, Pa.-based Advanta provides credit cards to small business through Advanta Bank Corp.

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