Southeast's Prepayment Not Seen Hampering Card-Backed Market

An early payout by Southern Banking Corp. on securities backed by its credit card loans will have little impact on the $50 billion card-backed securities market, observers said on Thursday.

The Miami-based bank said Wednesday it would pay off investors in a $300 million issue before its maturity to protect them against rising cardholder defaults. Concern about the recession's impact on card-backed securities has been rising in recent months, but Southeast is the first to retire an issue early.

Wall Streeters said the action is not likely to be repeated soon by other issuers nor to curb investor appetites.

A Special Situation

Interest in card-backed securities will remain strong, they said, because Southeast's situation is different from most banks that regularly come to the market.

The early payout "has disrupted things a little bit, but investors are more savvy than they were one year ago," said Gregory J. Raab of Fitch Investors Service.

One distinguishing feature of Southeast's card portfolio is a heavy concentration in Florida. Also, the annual percentage rate that Southeast charges is below industry norms, making it more difficult for the bank to recoup loan losses.

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