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Related Companies Advanta Bank Corp Advanta Corp. (ADVNQ)

Related Documents Press Release (PR) Advanta Corp. 11/8/2009, filed on 11/8/2009 10-Q Advanta Corp. 6/30/2009, filed on 8/10/2009

Related Articles 8/25/2009 The Storm Center: Ailing Advanta to sell or shutter insurance subsidiaries 7/31/2009 FDIC releases June enforcement actions 7/10/2009 Advanta commences layoffs 5/12/2009 Advanta aiming to 'dramatically' limit credit loss exposure

Advanta Corp. on Nov. 8 said it filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The Spring House, Pa.-based lender said it would not be able to meet all of its existing obligations over time despite having nearly $100 million in cash and equivalents on hand. The filing is intended to address this shortfall in an orderly way that benefits stakeholders most fairly.

The company is reviewing both existing and potential business opportunities in connection with the reorganization.

Advanta has about $138 million of senior retail investment notes outstanding, and the filing is expected to preserve the value of its assets which will, among other things, maximize recoveries of the senior retail noteholders.

The company's unit Advanta Bank Corp. is not included in the bankruptcy filing. The proceeding will not have any impact on outstanding credit card balances and customer payment obligations will continue on normal schedules.

However, Advanta Bank's capital is below regulatory capital requirements, and the company might, over time, be taken into receivership by the FDIC. Advanta consciously decided not to fund the capital deficiency of the unit in order to preserve value for the senior retail note holders and other stakeholders.

The company and unit had initiated a plan in May to limit their exposure to credit losses and add substantial value through the acquisition of class A bonds issued by the Advanta Business Card Master Trust. However, after initially clearing the plan, the FDIC eventually decided not to allow it to proceed.

After this, Advanta Bank proposed a second plan to enable Advanta to preserve value for its stakeholders and provide capital both for the company and the bank. However, an essential component of that plan recently also failed to secure FDIC approval leading to the Chapter 11 filing.

The company had warned in its Form 10-Q for the second quarter that its ability to continue as a going concern might depend on its ability to successfully implement a plan for new business opportunities.

As part of its efforts to cut costs amid a dramatic retrenchment of its business operations, Advanta had been looking to sell or shutter its two small insurance units: Advanta Insurance Co. and Advanta Life Insurance Co. The company had closed all of its business credit card accounts to customers' future use May 30. It had also initiated a plan in July to cut its work force by 50%.