Advanta files plan, expects to repay investment note, certificate holders

By Caroline Salls

Pittsburgh, Nov. 2 - Advanta Corp. filed its plan of reorganization and related disclosure statement Tuesday with the U.S. Bankruptcy Court for the District of Delaware.

According to the disclosure statement, the plan is a modified plan of liquidation that provides for seven liquidating trusts to be established.

Six of those trusts will liquidate and distribute the company's assets to creditors and equity holders.

The seventh trust will hold the stock of Advanta, which will continue to own the stock of its debtor subsidiary Advanta Service Corp. and non-debtor subsidiary Advanta Bank Holding Corp., along with some cash and part of the company's portfolio of business credit card receivables.

Advanta, Advanta Service and Advanta Bank Holding will also each continue to own an interest in credit card partnership Fleet Credit Card Services, LP.

According to a company news release, Advanta expects to repay most of investment note and RediReserve certificate holders' money under the plan.

"Investment noteholders 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," Advanta chairman and chief executive officer Dennis Alter said in the release.

Creditor treatment

Treatment of creditors will include:

• Holders of administrative expense claims, priority tax claims, secured claims and other priority claims will be paid in full in cash;

• Holders of investment note claims and RediReserve certificate claims against Advanta and general unsecured claims will receive class A beneficial trust interests;

• Holders subordinated note claims against Advanta will receive class A beneficial trust interests, but they will not receive a distribution on account of those interests until the investment note claims and RediReserve certificate claims are paid in full;

• Holders of subordinated claims will receive class B beneficial trust interests, but they will not receive a distribution until all other claims are paid in full;

• Holders of equity interests in the consolidated debtors other than Advanta Service, Advantennis and Advanta Shared Services Corp. will receive no distribution;

• Holders of equity interests in Advanta Mortgage Corp. USA, Advanta Auto Finance and Advanta Finance will receive class C beneficial trust interests, but they will not receive a distribution until all other claims are paid in full; and

• Equity interests in the Advanta Service debtor will be retained.

The company said the court is scheduled to consider approval of the disclosure statement in December. Advanta said it expects the plan to be approved sometime in early 2011.

Spring House, Pa.-based Advanta provides credit cards to small businesses through Advanta Bank Corp. The company filed for bankruptcy on Nov. 8, 2009. Its Chapter 11 case number is 09-13931.

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