* Advanta will stop lending next month
* Company has lost access to main funding source
* Shares fall 27 percent in afternoon trading
NEW YORK, May 12 (Reuters) - Advanta Corp, ADVNB.O 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.
The company said in a release late Monday that it 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 World War Two.
Advanta said its business cards managed net credit loss rate rose to 15.9 percent in the first quarter from 12 percent in the previous quarter, well above the credit card default levels of other rivals.
Credit card lenders are trying to protect themselves by tightening credit limits, rising standards, and closing accounts. They have also been slashing rewards, raising interest rates and increasing fees to cushion further losses.
The Spring House, Pennsylvania-based company’s shares fell 27.1 percent to $1.13 in afternoon trading on the Nasdaq. The stock is down 58 percent so far this year. (Reporting by Juan Lagorio, editing by Bernard Orr)
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