Moody's lowers Advanta

Moody's Investors Service said it downgraded Advanta Corp.'s senior unsecured debt to B1 from Ba3 and subordinated debt to B3 from B2 and changed the outlook to negative.

The rating action reflects Moody's concerns regarding the sharp erosion in Advanta's asset quality trends, heightened pressures on its funding and liquidity and the adverse effects of these factors on the firm's core profitability as it navigates a highly challenging environment for credit card lenders.

Advanta has cut back new loan originations and implementing a revamped customer segmentation strategy including significant price increases for some customer groups. In Moody's view, this strategy is sensible in light of current economic and market conditions but involves significant execution risk, including potential franchise impairment and adverse attrition of customers.

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