Creditrust to acquire United Credit Card Bank of La.

$2.3 million cash deal will enable local firm to issue its own cards

Banking

May 19, 1999|By Bill Atkinson | Bill Atkinson,SUN STAFF

Creditrust Corp. said yesterday that it has signed a definitive agreement to buy a Louisiana-based credit-card bank for $2.3 million in cash.

The Baltimore-based company, which acquires, collects and manages delinquent credit-card accounts, is buying United Credit Card Bank for 1.15 times book value.

The acquisition, which must be approved by regulators, will allow Creditrust to issue its own credit cards to customers and individuals who generally have poor credit histories.

"It is a big positive for the company," said John B. Keefe, an analyst at Ferris, Baker Watts Inc. in Baltimore. "Creditrust can very effectively leverage its vast information base in more ways than just simply collecting bills."

Shares of Creditrust jumped $1.125 in trading yesterday to $24.875.

Creditrust plans to rename the bank Creditrust National Bank, and seek regulatory approval to relocate the institution to Delaware. The deal is expected to close in early fall.

Issuing credit cards to consumers who have credit problems is a "wonderful entree into a market that other people don't really understand very well," said Joseph K. Rensin, chairman and chief executive of Creditrust.

The bank will be headed by Thomas J. Juranich, the former president of Owings Mills-based Key Bank & Trust's credit-card subsidiary. Key Bank has been issuing credit cards for Creditrust for about a year, Rensin said.

"We will definitely be using them [Key Bank] for other things," Rensin said. "They just won't be issuing our cards."

United Credit Card Bank issues MasterCard credit cards primarily to customers of its parent, United Companies Financial Corp., a Baton Rouge company that makes home loans to people with credit problems.

In March, United Companies filed for Chapter 11 bankruptcy protection from its creditors, which will give it time to reorganize operations.

Under the terms of the deal, Creditrust not only gets the bank charter, but $400,000 in credit-card receivables and $2 million in cash, Rensin said.

"It is a tremendous price," said Rensin, who noted that the transaction must also receive approval from the U.S. Bankruptcy Court judge. "We think we can bring value here."

Creditrust was started by Rensin in 1991, and raised more than $30 million in July in a public offering. The rapidly growing company has 1.7 million customers, 825 employees and $3.2 billion in credit-card receivables that it manages.

On Monday, Creditrust said that it leased half of a five-story building in Hunt Valley where it plans to employ about 1,500 credit-card account processors, customer service representatives and account maintenance employees.

Pub Date: 5/19/99

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