Moody's reviews MBNA Rating service raises concern over riskier credit card customers


NEW YORK -- MBNA Corp.'s long-term debt was placed under review for possible downgrade by Moody's Investors Service yesterday because of concern the credit-card issuer has signed up too many risky customers.

Moody's said about $3.5 billion worth of securities are affected.

Wilmington-based MBNA began in 1984 as the credit card unit of MNC Financial Corp., which moved it to Delaware to get around Maryland usury laws and then spun it off in 1991 to raise capital. MNC was bought by NationsBank.

Moody's said its concerns stemmed from MBNA's having sold credit cards to people in nonendorsed and nonaffiliated programs.

MBNA's business in the past has been strong because it has sold cards to people who feel a connection to a particular organization, such as a college alumni organization or a professional group.

Now the company is marketing nonendorsed cards, such as those that appeal to a customer's affection for his home state -- the most popular is the Texas card, featuring the Texas flag and the phrase "Don't Mess With Texas" -- or cards without an exclusive affiliation, such as those marketed through the National Football League.

Such cards offer a wider demographic base, which is not necessarily a good thing for people who own MBNA's debt, according to Moody's.

An MBNA spokesman said the company differed with Moody's view. David Spartin said MBNA has a 14-year history of producing loan losses that are lower than its industry competitors, that its 6 million new customers last year had an average income of $57,000, and an average 13-year history of paying their bills on time.

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