Advanta Corp, a US-based small business credit card lender, has filed a voluntary petition for reorganisation under Chapter 11 of the US bankruptcy code. Advanta said that, although it has has close to $100m in cash and equivalents on hand, over time it would not be able to meet all of its existing obligations.
Advanta Bank Corp, a wholly owned subsidiary of Advanta Corp, is not included in the Chapter 11 filing. The company said that Chapter 11 proceeding will not have any impact on outstanding credit card balances and customer payment obligations will continue on normal schedules.
Advanta Bank Corp’s capital is, however, below regulatory capital requirements and over time Advanta Bank Corp. may be turned over to an FDIC receivership. The parent corporation consciously decided not to fund the capital deficiency in order to preserve value for the senior retail note holders and other Advanta Corp stakeholders.
The filing at this time is intended to address that 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.
