Advanta Corp., a company that issues credit cards to small businesses, is not making new loans after defaults surged and it lost access to its main source of funding, and its shares fell 27 percent.
According to a Reuters report, the company will shut down about 1 million credit-card accounts on June 10, when it expects to lose access to the securitization trust it uses to sell credit-card loans to investors.
The suburban Philadelphia-based company will also use up to $1.4 billion to buy back debt issued by its main securitization trust, at 65 cents to 75 cents on the dollar.
Advanta will also make a cash offer for $100 million in trust preferred securities at 20 cents on the dollar.
U.S. credit-card defaults rose in March to new record highs, as more Americans lost their jobs amid the worst recession since WWII.