Advanta late entry in bidding for 1st City.

Dallas - Credit card giant Advanta Corp. is bidding for the failed First City Bancorp., lured by the prospect of a physical presence in Texas and hundreds of millions in tax breaks.

The Horsham, Pa.-based consumer finance company told a bankcruptcy court here it would invest as much as $20 million to acquire the remaining assets of the troubled bank holding company.

While refusing to comment on specifics, Advanta president Richard Greenawalt said the company does not currently have a physical presence in Texas. However, the market is one of the largest for the company's Visa and MasterCard operations.

"Any channel that enables us to provide our loan products and services through broader distribution channels is good for the company," Mr. Greenawalt said.

However, First City does not maintain any physical branches in Texas; its banking subsidiaries were seized by federal and state agencies on Oct. 31, 1992.

And Advanta would not be able to conduct its home equity loan operation in Texas, since state law prohibits second mortgages. Some observers close to the deal say First City's $635 million in net operating loss carryforwards are a primary factor in the minds of all bidders. First City generated the tax benefits as a result of losses incurred before the takeover.

Despite Advanta's interest, it may be too late. The credit card company has to have a disclosure statement ready for a hearing next week, and members of the creditor and equity committees would have little or no time to read and comment on the proposal.

Advanta's interest comes on the heels of a management-backed proposal submitted by J-Hawk Corp. and Cargill Financial Services Corp.

That plan call for J-Hawk, a Waco, Tex.-based acquirer of distressed financial assets, to merge with First City in exchange for 49% of the common stock of the reorganized company.

David MacLennan, a vice president with Minnetonka, Minn.-based Cargill, I told First City's board that it was prepared to invest up to $100 million of subordinated debt and equity in partnerships organized by the new First city and Cargill. These partnerships would acquire loans, real estate, and other nonperforming assets.

But that offer was rejected last week by a group of equity holders led by Michael A. Ward, Joe Ferrante, Bruce Mates, and distressed securities analyst Bill Eddleman.

In a motion filed the same day, the group said it was joining unsecured creditors in a move to jumpstart a $3 billion lawsuit filed by First City against the Federal Deposit Insurance Corp.

The motion claims the first city will Only recoup some $200 million of assets when a reorganization an undetermined amount later.

Meanwhile, the FDIC is taking $4 million a month as fees for managing the company. First City equivalent holders and the creditors' committee contend that this arrangement is grossly unfair.

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