Check Central Sold

San Diego-based Greenland Corp. announced Tuesday it has signed a letter of intent to acquire all of the outstanding shares of Check Central Inc. Check Central, has developed proprietary technology to provide automated check cashing, money orders, and ATM services from free-standing kiosks in retail locations. The acquisition of Check Central is structured as an all-stock transaction valued between $3.5 million to $5 million.

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Adding Octane

Chase Manhattan announced yesterday it is beefing up and simplifying its ‘Shell MasterCard’. As of June 1, the $70 annual cap on rebates will be eliminated on gasoline and non-gasoline purchases. Chase and Shell also announced they have increased the rebate on Shell gasoline purchases to 5% from 3%. However the rebate for non-gasoline purchases will drop from 2% to 1%. The MasterCard program is the largest gasoline co-branded credit card in the market and ranks among the top 10 co-branded programs nationally. Chase revealed Tuesday that more than $300 million in rebates have been earned by cardholders since the card’s inception in Oct 1993. According to CardData there are an estimated 2.7 million ‘Shell MasterCard’ cards-in-force.

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DataBank Sold

Xtranet Systems Inc. Monday announced that the shareholders of Xtranet and DataGate International(Nevis) have approved the previously announced acquisition of DataGate International by Xtranet.

The purchase price is comprised entirely of Xtranet common shares. DataBank International concurrently announced the establishment of DataBank(Bahamas) and DataBank(Barbados) in addition to the already established DataBanks in Nevada and Nevis, Wis. DataBank(Nevis) is the first DataBank to fully utilize the DataGate System and is currently processing credit card transactions through the Bank of Nevis.

Through its DataBank Network, DataGate is a provider of credit card processing services, electronic currency services, and stand alone financial processing systems, to offshore financial institutions and commercial merchants. DataGate is the originator of MasterCoin, the next generation of Internet electronic currency, utilizing a state-of-the-art token-based system. Further information in regard to DataGate systems and services will soon be posted on Xtranet’s Web site, located at [http://www.xtrasystems.com.][1] DataGate currently handles the credit card processing for the Bank of Nevis, which, when combined with credit card processing transactions in progress, projects to $250 million annually in credit card processing business.

Each DataBank maintains a local relationship with a local financial institution and local merchants. DataGate International maintains a minority interest in each DataBank, and receives fee income from the licensing of its DataGate system and application to each DataBank.

Xtranet is the creator, developer and producer of online Internet-based extranet systems and service applications. The company has focused on developing and marketing its turn-key sportsbook system to legal offshore gambling companies, and to developing and producing sports pool games. With the acquisition of DataGate, the company plans to primarily focus its attention on the implementation of Xtranet’s offshore financial processing capabilities.

The statements discussed in this news release include forward-looking statements that involve a number of risks and uncertainties. These include the company’s historical lack of profitability, issues associated with international transactions, the need to manage its growth, the need to raise funds for operations, and other risks associated with a development stage company.

[1]: http://www.xtrasystems.com

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Sears Chargeoffs Hit 9.5%

Standard & Poor’s CreditWire 5/18/98 — Standard & Poor’s affirmed its ratings on the outstanding series of Sears Credit Account Master Trust II investor certificates (see list below).

This rating action follows a proactive move by Sears to alleviate investor concerns of rising loss rates by raising credit enhancement levels on all of its publicly-rated credit card-backed securities issued out of Sears Credit Account Master Trust II.

This increase in enhancement across all series illustrates Sears’ commitment to protecting investors. Sears has boosted enhancement for its publicly-rated, fixed-rate deals by increasing the size of each seller-retained C class by 400 basis points (Standard & Poor’s does not rate seller-retained C classes). As a result, total credit enhancement to the triple-‘A’ certificates increased from 11% to 15%. The credit enhancement associated with series 1998-1 will reflect these new levels.

Reported gross charge-offs increased steadily during 1997 but have leveled off during the first quarter of 1998 at about 9.5%. As of the April 1998 reporting period, the three-month average charge-off rate was 37% higher than the 6.7% charge-off rate recorded in April 1997 period. The increase in gross charge-off rates during 1997 has raised significant credit quality concerns. As part of its routine surveillance process, Standard & Poor’s has maintained an ongoing dialogue with Sears’ management and has been closely monitoring portfolio performance trends.

Partially offsetting the rise in charge-off rates, in January 1998, Sears began including recoveries from charged-off accounts in finance charge collections available to certificateholders. The inclusion of recoveries has boosted portfolio yield by 160 to 200 basis points. This increase is due to the fact that certificateholders receive 100% of the recovery stream, while the seller retained certificates receive no benefit. The inclusion of recoveries, along with the recent stabilization of losses, has had a positive impact on excess spread. In the last four months, three-month-average excess spread in the trust has improved steadily, moving to 4.88% in April from 3.37% in January.

Separately, On May 14 Sears announced that the company had entered into an long-term agreement with Total Systems Inc. to provide certain computer processing services. Sears expects the system conversion to enhance its ability to effectively manage its Sears credit card accounts. The conversion will be the largest in the history of the credit card industry, affecting 60 million accounts. The conversion is expected to temporarily cause an increase in charge-offs since it will change the methodology used to age delinquent accounts. Currently, delinquencies are calculated based on the scheduled monthly payment and the amount past due. The new aging methodology determines delinquency levels based on the number of billing cycles that have elapsed since the customer’s last payment, a practice common in the bankcard industry.

To measure the impact of the new methodology on delinquency statistics, Sears used historic account activity from a 10% random sample of accounts to simulate the difference between the current and new methodologies. The simulation showed that charge-offs increased by 75 to 100 basis points following the conversion and declined close to original levels 12 months after the conversion. We expect excess spread to be negatively impacted due to the conversion, however its effects should be mitigated since the conversion is expected to take place in three phases with an expected completion date sometime in the second quarter of 1999, Standard & Poor’s said.

OUTSTANDING RATINGS AFFIRMED

            Rating  Original Initial   Revised Initial
Certificate Balance Certificate Balance

Series 1994-1

  Class A      AAA        $750,000,000  $750,000,000
  Class B      A           $33,500,000   $33,500,000
  Class C                  $59,197,000   $98,857,000

Series 1995-2

  Class A      AAA        $600,000,000  $600,000,000
  Class B      A           $26,970,000   $26,970,000
  Class C                  $47,192,000   $78,917,000

Series 1995-3

  Class A      AAA        $500,000,000  $500,000,000
  Class B      A           $22,500,000   $22,500,000
  Class C                  $39,330,000   $65,740,000

Series 1995-4 (Note A)

  Class A       AAA       $500,000,000  $500,000,000
  Class B       A          $22,500,000   $22,500,000
  Class C                  $37,180,000   $61,330,000

Series 1995-5

  Class A       AAA       $500,000,000  $500,000,000
  Class B       A          $22,730,000   $22,730,000
  Class C                  $45,520,000   $65,520,000

Series 1996-1

  Class A       AAA       $500,000,000  $500,000,000
  Class B       A          $22,500,000   $22,500,000
  Class C                  $39,330,000   $65,740,000

Series 1996-2

  Class A      AAA        $500,000,000  $500,000,000
  Class B      A           $22,500,000   $22,500,000
  Class C                  $39,330,000   $65,740,000

Series 1996-3

  Class A      AAA        $500,000,000  $500,000,000
  Class B      A           $22,500,000   $22,500,000
  Class C                  $39,330,000   $65,740,000

Series 1996-4

  Class A      AAA        $500,000,000  $500,000,000
  Class B      A           $22,500,000   $22,500,000
  Class C                  $39,330,000   $65,740,000

Series 1997-1

  Class A      AAA        $500,000,000  $500,000,000
  Class B      A           $22,500,000   $22,500,000
  Class C                  $39,330,000   $65,740,000

Note A: As a result of scheduled amortization, the present amount of Class A equals $375,000,000 and Class C equals $55,169,551

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Indonesian Card Bonds Downgraded

Duff & Phelps Credit Rating Co. (DCR) has downgraded the ratings of its Indonesian bank and structured transactions.

All the ratings remain on Rating Watch–Down.

The following transactions and bank ratings have been downgraded to ‘B-‘ (Single-B-Minus):

*  P.T. Bunas Finance TBK Auto Loan Receivables     *  P.T. BII Trust Certificates Credit Card Receivables     *  P.T. Bank International Indonesia Foreign Currency (sr. unsec.) Local Currency (sr.unsec.)

The rating downgrades and the continuation of Rating Watch–Down status reflect the deteriorating creditworthiness of the government of Indonesia as a result of the increasingly unstable political situation in the country. Social unrest in the capital city and elsewhere in the country, sparked by economic decline and rising prices, have put the viability of the Suharto government in question.  As a result, the operating environment for these structured transactions has worsened.

The ratings assigned to P.T. Bank International Indonesia positively incorporate the current level of financial support supplied by the Sinar Mas Group.  Although it remains unclear if social unrest can be contained and an environment of normalcy restored (within which the IMF-supported economic program can move forward), DCR believes — at the present time — foreign exchange resources (at approximately US$15 billion), remain sufficient to cover sovereign debt service payments.  Further deterioration in the credit fundamentals could put sovereign debt service coverage at risk. DCR continues to monitor developments in Indonesia closely.

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Jay Jacobs Card

Seattle-based specialty apparel retailer  Jay Jacobs will introduce its new private label credit card tomorrow. The ‘Jay Jacobs Credit Card’ offers 10% off the first purchase with the card; exclusive discount coupons; special previews of upcoming fashion collections; and advanced notice of special sales and in-store events. The retailer operates in 105 mall locations in 19 states. The card is being issued in partnership with SPS Payment Systems.

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PMT Alligator

ISO leader PMT Services, Inc. swallowed yet another portfolio yesterday with the signing of a definitive agreement to acquire MBN National, Inc., an ISO headquartered in the Los Angeles area. This marks PMT’s ninth acquisition of the current fiscal year.  MBN will bring a merchant portfolio of approximately 8,000 accounts, producing annualized charge volume of approximately $400 million, to PMT. In addition, PMT will gain a seasoned sales force through the transaction, which is currently generating approximately 300 accounts per month.  The latest transaction will increase PMT’s internal account generation capability to approximately 4,000 merchant accounts per month from as few as 300 accounts two years ago.

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Indonesia Trouble

The American Express Travel Office in Jakarta has beefed up security and continues to provide services throughout the current difficulties.  The customer tele-servicing center has been continuing to operate on a 24-hour basis with backup support from the company’s regional operating centers across Asia.  AmEx also established additional customer services facilities in a Jakarata hotel. The company has chartered a number of aircraft for the timely evacuation of cardmembers and travelers. There is no estimate on when the civil unrest may settle.

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New CheckFree EVP

CheckFree announced Monday that John Limbert will join the company as EVP of customer operations, effective immediately.  Limbert will be responsible for all of CheckFree’s electronic commerce customer operations, including customer care, payment operations, implementations, system conversions, and customer operations planning and development. Prior to CheckFree, Limbert spent 20 years with Banc One, most recently as head of its Eastern Region Consumer Banks.

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Deposit Access

Deposit access products will account for the single largest share of transactions in the global payments by the year 2005, according to MasterCard CEO Robert Selander, who spoke at the company’s Asia/Pacific Regional annual meeting in Perth, Western Australia last week. Over the past five years, since Maestro was launched in Asia/Pacific, the global debit program has reached 40 million cards in the region and is projected to grow to 100 million by the year 2000. Selander commented that emerging platforms such as chip and deposit access are two areas that member financial institutions should be focusing on to position themselves competitively and strategically for the future.

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