In Advanta Corp.'s 8-K filing with the Securities & Exchange Commission last month, concerning the sale of its mortgage unit to Chase Manhattan, the company described an escrow account of $70 million, to be funded until the finalization of an ongoing lawsuit associated with the sale of Advanta's credit card portfolio to FleetBoston back in 1998.
Cited from the filing: "[W]ith regard to Fleet's attempt to block the previously announced sale of Advanta's mortgage business to Chase Manhattan Mortgage Corp. the effect of the agreement is that Fleet's motion for an injunction is moot and the case will be dismissed."
The lawsuit with Fleet is not expected to reach trial for another year or so, industry sources said. Apparently, Fleet was concerned that with Advanta disposing of the a substantial segment of its business - and taking on a monoline-like risk profile, according to the rating agencies (see Advanta, ASR 10/30/00, p.2) - there is question as to whether the funds for a settlement would be available, should the suit favor Fleet.
In the original lawsuit, Fleet claimed Advanta overvalued its credit-card business, and failed to disclose liabilities associated with the portfolio.