On March 19, 2010, the Utah Department of
Financial Institutions closed Advanta Bank Corp. (the “Bank”), the
servicer of the Advanta Business Card trust (the “Trust” or “Advanta”)
and appointed the FDIC as receiver. Moody’s is not taking further rating
actions at this time because previous rating actions had been predicated
on our view that a Bank receivership was highly likely. The Trust entered
early amortization in May 2009 and Advanta Corp. (the Bank’s parent
company) filed a voluntary petition for reorganization under Chapter 11
on November 8, 2009.
The consequences of the Bank receivership are still uncertain. The FDIC’s
actions, and provisions in the Trust transaction documents that govern
actions such as the Bank closure, may affect transaction performance. In
a notice to investors dated March 24, 2010, the indenture trustee reports
that the FDIC indicated to them that it is unlikely that it will choose
to continue to perform the functions of servicer of the Trust. The
transfer of servicing duties to a third party could adversely affect
collateral performance, at least temporarily.
If the Trust’s performance remains stable at February 2010 reported
levels, we expect the Class A notes to be fully repaid by the end of the
year. Even if performance deteriorates, the Class A notes benefit today
from approximately 50% of credit enhancement in the form of
subordination, providing a sizeable insulation to absorb losses. Our Ba2
rating on the senior notes reflects the possibility of the receivership
and the ability of the notes to withstand performance deterioration that
might follow this event. The repayment of the Class B notes depends
greatly on the trajectory of the charge-off rate, a metric that a change
in servicing could materially affect. This uncertainty is reflected in
our current Ca ratings on these notes.
METHODOLOGY
The principal methodology used in rating the transaction was “Moody’s
Approach To Rating Credit Card Receivables-Backed Securities,” which can
be found at www.moodys.com in the Rating Methodologies sub-directory
under the Research& Ratings tab. Other methodologies and factors that
may have been considered in the process of rating this issue can also be
found in the Rating Methodologies sub-directory on Moody’s website. In
addition, Moody’s publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
