Advanta Expects to Repay Most of Investment Note and RediReserve Certificate Holders’ Money
November 02 2010 - 6:39PM
Business Wire
Advanta Corp. (PINKSHEETS: ADVBQ; ADVNQ) announced today that
it, together with certain of its subsidiaries (the “Debtors”),
filed a Debtors’ Joint Plan (the “Plan”) under chapter 11 of the
United States Bankruptcy Code and a Disclosure Statement related to
the Plan (the “Disclosure Statement”). The Plan and Disclosure
Statement have been approved by the Debtors’ Boards of Directors
and are subject to the approval of the bankruptcy court. Among
other things, the Disclosure Statement provides projections for the
approximate percentage recovery rates for claims against Advanta
including a recovery range of 64.4% to 100.0% for Investment Note
claims and RediReserve Certificate claims, and a recovery range of
37.7% to 71.3% for General Unsecured claims against the
Consolidated Debtors, as defined in the Plan. As previously
disclosed, the Debtors anticipate that there will be no
distributions to the preferred or common stockholders of Advanta
Corp. nor continuing interest in Advanta Corp. (or any of the
trusts formed under the Plan) on the part of the preferred or
common stockholders.
This beneficial result for creditors comes about for a number of
reasons including the fact that:
- The Company placed itself in bankruptcy
at a time when it had approximately $100 million in cash and
equivalents enabling it to preserve cash for creditors rather than
having it dissipated.
- The Company was able to file its tax
returns in a way that in combination with the successful resolution
of ensuing litigation reduced a claim by the FDIC relating to
Advanta Bank Corp. from $170 million to between zero and $50
million and provides for a potential recovery for the Company of $5
million.
- The Company was able to preserve assets
as a result of successful litigation with the FDIC involving
another banking subsidiary, Advanta Bank; and,
- The Company was able to secure control
and transition servicing of a portfolio of credit card receivables
that it owns.
“Because of these actions, Investment Note holders and
RediReserve certificate holders, who are our largest group of
creditors, could potentially recover all of their investment which
has been a key goal of ours in these otherwise unfortunate
circumstances,” said Dennis Alter, Chairman and CEO.
The bankruptcy court is scheduled to consider approval of the
Disclosure Statement in December 2010. Once approved, the Plan will
be sent to eligible creditors for voting. The Company anticipates
approval of the Plan sometime in early 2011.
For a copy of the Plan and Disclosure Statement, please visit
www.advantareorg.com.
About Advanta
Advanta Corp. has had a 59 year history of being a leading
innovator in the financial services industry and of providing great
value to its stakeholders, including its senior retail note holders
and shareholders, prior to the recent reversals. It has also been a
major civic and charitable force in the communities in which it is
based, particularly in the Greater Philadelphia area.
This Press Release contains forward-looking statements that are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those projected. The most
significant among these risks and uncertainties are: (i) the
ability of the Debtors to prosecute and consummate the Plan,
including the risk that the Official Committee of Unsecured
Creditors appointed in the Debtors’ chapter 11 cases (the “Chapter
11 Cases”), or another third party objects to the Plan or
Disclosure Statement, or files a competing plan under chapter 11 of
the United States Bankruptcy Code (“Chapter 11”); (ii) risks
associated with third parties seeking and obtaining court approval
to convert the Chapter 11 Cases to cases under chapter 7 of the
United States Bankruptcy Code; (iii) the ability of the trustees to
execute and implement a confirmed plan in a cost-effective and
timely manner; (iv) the bankruptcy court’s rulings in the Chapter
11 Cases and the outcome of the Chapter 11 Cases in general; (v)
the length of time the Debtors will operate under the Chapter 11
Cases; (vi) the increased legal and other professional costs
related to the Chapter 11 Cases, litigation and other legal
proceedings; and (vii) the Debtors’ ability to maintain contracts
with suppliers and service providers and to retain key executives,
managers and employees. The cautionary statements provided above
are being made pursuant to the provisions of the Private Securities
Litigation Reform Act of 1995 (the “Act”) and with the intention of
obtaining the benefits of the “safe harbor” provisions of the Act
for any such forward-looking statements. Additional risks that may
affect the approximate percentage recovery ranges for creditors are
detailed in the Disclosure Statement, including Section VI of the
Disclosure Statement which sets forth certain factors that should
be considered prior to voting on the Plan.
Nothing in this Press Release constitutes a solicitation of
acceptance or rejection of the Plan. Acceptances or rejections may
not be solicited until a Disclosure Statement has been approved by
the bankruptcy court.