By plunking down $1 billion to keep and expand its cobranding contract with Delta Air Lines Inc., American Express Co. is following through on a promise to continue making strategic investments despite funding and credit challenges.

In the past two months, the New York credit card issuer has converted to a bank holding company, said it would lay off about 10% of its global work force, and raised capital — mostly with government assistance. This week, Amex raised $5.5 billion by selling federally guaranteed bonds, and on Tuesday the company said it could raise up to $13.3 billion this way, 50% more than it originally thought. It also said Tuesday that it had raised $4.6 billion of retail deposits since October.

But retention of the cobranding contract, which had been in question since Delta said in April that it would merge with Northwest Airlines Corp., was widely viewed as crucial for Amex. According to analysts, Delta cardholders generate about 5% of Amex's worldwide billed business volume and 15% of its managed credit card receivables; the Northwest merger, which closed in October, made Delta the world's largest airline.

"You won't see us investing in lots of big strategic initiatives, but you will absolutely, even in this environment, see us invest in a select number of strategic investments so that, as the entire economy gets through these difficult times, we come out stronger, we gain market share," Pamela Codispoti, a senior vice president and the general manager of consumer cobrand partnerships at Amex, said in an interview Tuesday.

As part of the seven-year renewal of its contract with Delta, announced Tuesday, Amex agreed to prepurchase $1 billion of Delta SkyMiles points from the airline up-front. Also, Amex will be paying Delta more for each point redeemed at the airline through the issuer's flagship Membership Rewards program, so Amex will take a charge of about $100 million this quarter to add to its reserve against unredeemed points.

Spending the money "to fuel future growth in our metrics and our financials was a very rational and disciplined decision that we made after doing a lot of analysis," Ms. Codispoti said.

Michael Taiano, an analyst at Sandler O'Neill & Partners LP, said that for Amex "it was important to maintain" the Delta relationship. "You'd like to hold onto $1 billion from a liquidity standpoint," he said, "but if they couldn't afford it they wouldn't have done it."

Sanjay Sakhrani at Keefe, Bruyette & Woods Inc. echoed other analysts when he called the growth in Amex's retail deposits a "big step forward." But the fact that so much of its fund raising has been government-assisted led Scott Valentin at Friedman, Billings, Ramsey Group Inc., to reiterate his "underperform" rating of the company's stock Tuesday.

Amex "remains dependent (both directly and indirectly) on government programs for funding … until the [asset-backed securities] market reopens," he wrote.

A spokeswoman for Amex said, "All financial services companies and banks are reliant on the government-sponsored programs," but "American Express has been able to diversify its funding by increasing its deposit capabilities, and we've also continued to issue commercial paper despite the tough funding environment."

Amex also said Tuesday that it had received clarification from the Federal Reserve that the company may use charge card receivables, not just credit card receivables, as collateral for borrowing from the discount window. (Amex has not actually borrowed from the window, which it called "an additional source of contingent liquidity, if needed.")

Delta said it will merge its frequent-flier program with Northwest's by late next year. At that point Amex will become the sole cobrand partner and U.S. Bancorp's relationship with Northwest will end. But Amex is "not acquiring or converting" U.S. Bancorp's existing cobrand cards, Ms. Codispoti said. "When U.S. Bank exits, we become the exclusive partner, we will work with Delta to target" customers in areas like U.S. Bank's headquarters city of Minneapolis.

Clifford Cook, the chief marketing officer for the retail payment solutions division of U.S. Bank, said it is "still evaluating the merits of retaining or selling the portfolio" of Northwest-cobranded credit cards.

Delta said it will keep its corporate lending, merchant acquiring, and cobranded debit card relationships with U.S. Bank. Mr. Cook said, "We're going to be working with Delta to expand the existing debit relationship."

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