SAN FRANCISCO, April 15 /PRNewswire-FirstCall/ --
Providian Financial Corporation (NYSE: PVN) today announced that it has
reached agreements with two limited liability companies formed by affiliates
of Goldman, Sachs & Co., Salomon Smith Barney, CardWorks, Inc., and
CompuCredit Corporation to initiate a structured sale of approximately
$2.6 billion of higher risk assets. The purchasers plan to finance the
acquisition through a securitization. Providian National Bank would hold an
interest in the securitized assets valued at approximately $155 million, and
Providian Financial Corporation preserves an option to purchase up to 15% of
the equity in the limited liability companies. The transaction, which remains
contingent upon completion of the financing and other customary closing
conditions, is currently expected to close in May.
"These agreements mark another important step in our restructuring
effort," said Providian Chief Executive Officer Joseph Saunders. "Assuming
successful completion, these transactions will reduce our credit risk profile,
improve our ability to focus on the middle and prime sectors, create
opportunities to reduce our expense base, and further strengthen our liquidity
position." Saunders noted that the potential sale of the higher-risk
portfolio was contemplated by the capital plan Providian filed with its
regulators. Providian announced its intention to explore opportunities for
the sale of the portfolio in November of 2001.
The transaction involves approximately 1.7 million credit card accounts.
Providian generated the majority of the assets in the portfolio through
marketing programs that it has since discontinued. Under the terms of the
transaction, Providian would continue to service the portfolio for a period of
up to 12 months.
Providian currently holds substantial capital and reserves against the
assets in the portfolio. While closure of the transaction would result in an
after-tax loss of approximately $240 million based on current estimates, the
transaction should also result in an improvement in Providian National Bank's
risk-based capital ratios (as calculated under regulatory guidance for
subprime assets) by removing higher risk-weighted assets from the Bank's
balance sheet.
San Francisco-based Providian Financial is a leading provider of credit
cards and deposit products to customers throughout the U.S. Since announcing
a five-point strategic plan in October, 2001, Providian has taken a number of
critical steps to restore investor confidence and rebuild shareholder value.
In addition to the transaction announced today, some of the most important
steps have included:
-- Appointment of Joe Saunders as the Company's new CEO
(November 26, 2001);
-- Sale of the Providian Master Trust (January 16, 2002);
-- Regulatory acceptance of the Company's three-year plan to rebuild its
capital (February 7, 2002);
-- Strengthening the Company's executive management team;
-- Agreement to sell the Company's United Kingdom business
(February 20, 2002); and
-- Agreement to sell the Company's Argentina business (March 7, 2002).
This release contains forward-looking statements as to the Company's
expectations, intentions and goals that are subject to the "safe harbor"
provisions created by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include expressions of "belief," "expectations,"
"intentions" and other words of similar import, statements as to industry and
economic trends and future results of the Company, and other statements that
are not historical facts. Such forward-looking statements are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Among the
significant risks and uncertainties are: competitive pressures; factors that
affect delinquency rates, credit loss rates and charge-off rates; general
economic conditions; consumer loan portfolio growth; changes in the cost
and/or availability of funding due to changes in the deposit, credit or
securitization markets; changes in the way in which the Company is perceived
in such markets and/or conditions relating to existing or future financing
commitments; the effects of government policy and regulation, whether of
general application or specific to the Company, including restrictions and/or
limitations relating to the Company's minimum capital requirements, deposit
taking abilities, growth, reserving methodologies, dividend policies and
payments, growth, and/or underwriting criteria; changes in accounting rules,
policies, practices and procedures; product development; legal and regulatory
proceedings, including the impact of ongoing litigation; interest rates;
acquisitions; one-time charges; extraordinary items; the ability to attract
and retain key personnel; the impact of existing, modified or new strategic
initiatives; and international factors. Readers are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the date
thereof. The Company undertakes no obligation to update any forward-looking
statements. More information on risks and uncertainties relating to the
Company are available in the Company's filings with the Securities and
Exchange Commission, including its annual report on Form 10-K, quarterly
reports on Form 10-Q, and current reports on Form 8-K.
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SOURCE Providian Financial Corporation
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Related links:
http://www.providian.com
CONTACT:
Media, Alan Elias, +1-415-278-4189, or Laurel
Munson, +1-415-278-4770, or Investors, Jack Carsky,
+1-415-278-4977, or Bill Horning, +1-415-278-4602, all of
Providian Financial Corporation
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