Advanta faces having to reinvent itself

Advanta Corp. and its chief executive officer, Dennis Alter, have long been major Philadelphia philanthropists, recently sponsoring "Cezanne and Beyond" at the Philadelphia Museum of Art and donating $15 million for the new Alter Hall at Temple University.

But that deep well appears to be threatened by financial woes at the Montgomery County credit card firm, which last week took the unprecedented step of closing all customers' accounts to new charges as of June 10.

The reason: Too many have not been paying their bills during the recession.

Alter, 66, who has made more than $100 million from the company since the early 1990s, including stock sales and dividends to his charitable funds, said in an interview Thursday that times had changed. He would not, however, say his philanthropy was threatened.

"I think the last three years have caused a lot of people to reassess their ability to do the things they have done in the past," he said. "I'm not making any commitments right now to support or not to support any of the institutions we've supported in the past."

Gail Harrity, the Art Museum's interim chief executive, praised Alter's record.

"Advanta has been a committed and inspired supporter of the arts. Dennis has shown extraordinary leadership in that support, and the benefit has been enormous to not just the museum, but to the region," Harrity said.

Debra Kahn, executive director of Delaware Valley Grantmakers, which describes itself as a forum for philanthropy, said it would be "a very, very significant loss for our region" if that support were to end.

The warm feelings for Alter and his company are not shared by industry analysts and some of Advanta's customers.

Analysts are treating the company as though it is run-off, which means it will collect the debts its existing customers owe, use the money to pay off as much of what it borrowed as possible, and then cease operations.

Alter, on the other hand, is trying to ensure that Advanta has "a chance to fight again and be a vibrant and worthwhile business endeavor. Hopefully, we'll be able to do it," he said.

Advanta grew from humble origins nearly 60 years ago when Alter's father quit his job as a Philadelphia schoolteacher to start making loans to his former colleagues. The company, based in Spring House, has had a volatile run since changing its name from Teachers Service Organization Inc. and first selling stock to the public in 1985.

Under Dennis Alter's leadership since the early 1970s, the company shifted its focus from its original business of making installment loans to consumer credit cards, then to subprime mortgages, and then to small-business credit cards, growing aggressively each time and having to reinvent itself amid tough losses.

"I've been through this before, maybe not this extreme, but I've been through this before," Alter said.

Along the way, he helped boost Philadelphia's image internationally through the Advanta sponsorship of high-profile exhibits at the Art Museum - Cezanne in 1996 and now, plus the Dalí show in 2005. In addition, he did all he could to keep professional tennis tournaments in the region.

Alter was not all charity. He also collected art and built a 38,000-square-foot house in Whitemarsh Township to display it. For his 60th birthday party in 2002, he hired Elton John to put on a 90-minute concert.

Besides the art museum and Temple, Alter and his wife, Gisela, have plowed money into the Opera Company of Philadelphia, the Arthur Ashe Youth Tennis Center, and many other local causes.

Alter declined to say how much he has given, beyond the already-public figure of $15 million to Temple, his alma mater.

That generosity leaves one former customer with mixed feelings. "I would never be able to give $15 million. That's wonderful. I support Temple and I like the Art Museum," said Henry Vinikoor of Abington, who has a business selling packaging machinery.

But Vinikoor, also a Temple graduate, was incensed about six months ago when Advanta boosted his interest rate to 36 percent. "I had about a $20,000 balance outstanding and was three days late on a bill," Vinikoor said. "It cost me $500."

"I'm conflicted," he said. "Here he is a pirate and nobody knows he's a pirate."

Several current small-business customers, faced with a June 10 deadline to find a new card, said they were bitter about how they had been treated by Advanta. That is a factor Advanta will have to contend with if it tries to start making loans again, credit card industry observers said.

"I think there would be a lot of resentment," said Jim Shanahan, chief executive of Maverick Network Solutions Inc., a prepaid-card company in Wilmington and a 30-year veteran of the industry.

"It's hard to see where Advanta goes from here," said Chris Wolfe, an analyst at Fitch Ratings Inc., of New York.

Wolfe said the only other time credit cards were closed down across the board was in the case of a start-up that federal banking regulators seized in 2002. He said it had never happened voluntarily, as it did in Advanta's case.

Philip Browne, Advanta's chief financial officer, said regulators did not spur the company's action, which was designed to preserve enough capital to revive itself with new business, however slim those chances might be.

Harrity, of the Art Museum, is not ready to count Alter out. "I can only imagine that his extraordinary leadership skills in the arts would be carried through in his business as well," Harrity said.