Spiegel Closes Bankcard Business
The number of active accounts affected is 740,000, said Spiegel spokeswoman Debbie Koopman. The majority of the portfolio includes the FCNB MasterCard and FCNB Visa cards, along with some Spiegel MasterCard and Eddie Bauer MasterCard accounts.
The company plans to continue to offer private-label credit to its customers, Koopman said. She would not say what the financial effect on the company would be.
The discontinuing of the bankcards came after a Feb. 14 letter from the Office of the Comptroller of the Currency required FCNB to immediately start liquidating the bankcard portfolio. Last year, OCC criticized record-keeping at FCNB, which is a wholly owned subsidiary of Spiegel, and ordered Spiegel to develop a plan to sell or liquidate the bank.
Spiegel's bad-debt levels started to soar three years ago as the company targeted the sub-prime market. The losses drained capital at FCNB and have contributed to a string of bad news.
Another looming problem for Spiegel is the possibility of "automatic payout events" early this month to holders of securities of its bankcard and private-label assets. This likely would prevent it from obtaining alternative financing and require the company to fund the payouts with cash from new receivables, leaving it with little or no incoming cash to fund daily operations.
Spiegel last week named William Kosturos chief restructuring officer and interim CEO. Kosturos is a managing director at Alvarez & Marsal Inc., an international turnaround and management consulting firm. The appointment followed the retirement of Martin Zaepfel from his positions as vice chairman, president/CEO effective March 1.