NextBank was closed and placed into Federal Deposit Insurance Corp. receivership by the OCC in February 2002. The most controversial aspect of the receivership was the FDIC's decision to forestall or stop the early amortization of NextCard's credit card ABS. According to the Trust's covenants, "certain bankruptcy, insolvency, liquidation, conservator-ship, receivership or similar events relating to the transferor (including any additional transferor)" will cause an early payout of the outstanding certificates. Early redemption covenants are found in most credit card ABS structures, and most investors rely on them to protect principal.

The FDIC's key motive for exercising its supervisory powers and disregarding this covenant was to buy time and find a buyer for the portfolio. Initially, most note holders viewed this as a neutral-to-positive development, and the prospect of finding a buyer was considered highly likely. Moreover, if a major bank credit card issuer were to purchase and service the portfolio, then NCMNT bond valuations would, theoretically, benefit, as the likelihood of a full repayment of principal increases exponentially. At that time, finding a buyer seemed reasonable given the good credit quality of the portfolio (700 avg. FICO at account origination), its relatively small size ($1.8 billion), and the fact that most of the data processing is handled by First Data Resources (FDR), a major bank credit card processor. However, after five months of searching, it became apparent that the FDIC's inexperience in selling a credit card portfolio and limited knowledge of the bank credit card industry contributed to its inability to complete a sale.

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