Magazine article American Banker

Advanta Late Entry in Bidding for 1st City

Magazine article American Banker

Advanta Late Entry in Bidding for 1st City

Article excerpt

Dallas - Credit card giant Advanta Corp. is bidding for the failed First City Bancorp., lured by the prospect of a physical presence in Texas and hundreds of millions in tax breaks.

The Horsham, Pa.-based consumer finance company told a bankcruptcy court here it would invest as much as $20 million to acquire the remaining assets of the troubled bank holding company.

While refusing to comment on specifics, Advanta president Richard Greenawalt said the company does not currently have a physical presence in Texas. However, the market is one of the largest for the company's Visa and MasterCard operations.

"Any channel that enables us to provide our loan products and services through broader distribution channels is good for the company," Mr. Greenawalt said.

However, First City does not maintain any physical branches in Texas; its banking subsidiaries were seized by federal and state agencies on Oct. 31, 1992.

And Advanta would not be able to conduct its home equity loan operation in Texas, since state law prohibits second mortgages. Some observers close to the deal say First City's $635 million in net operating loss carryforwards are a primary factor in the minds of all bidders. First City generated the tax benefits as a result of losses incurred before the takeover.

Despite Advanta's interest, it may be too late. The credit card company has to have a disclosure statement ready for a hearing next week, and members of the creditor and equity committees would have little or no time to read and comment on the proposal. …

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