Retail News Breaks
Target sells credit card portfolio to TD Bank Group
October 23rd, 2012
MINNEAPOLIS – Target Corp. has agreed to sell its entire consumer credit card portfolio to TD Bank Group (Toronto Dominion Bank) for an amount equal to the gross value of receivables outstanding at the time of closing. The portfolio currently has a gross value of about $5.9 billion, according to Target.
In addition, the two companies have concluded a seven-year agreement under which TD Bank will underwrite, fund and own future receivables from the Target Credit Card and Target Visa in the United States. TD Bank will control the risk management policies and regulatory compliance, while Target will continue to perform account-servicing functions. The transaction, subject to regulatory approval and other usual closing conditions, is expected to close in the first half of calendar 2013.
"Target is very pleased to have reached this agreement with TD, which is the result of extensive efforts by teams at both companies," said Gregg Steinhafel, chairman, president and chief executive officer of Target. "This transaction achieves all of Target’s strategic and financial goals for a portfolio sale."
Under the seven-year program, Target will maintain the current deep integration between its financial services and retail operations, but the program will have no impact on Target’s 5% REDcard Rewards program.
Target projects that its reported earnings per share for the third quarter of fiscal 2012 will include a pretax gain of about $150 million as the result of a change in the accounting treatment of its receivables from “held for investment” to “held for sale.” Furthermore, Target expects to recognize an additional pretax gain of $350 million to $450 million on the portfolio sale at the time of closing.
The retailer expects to apply about 90% of the net transaction proceeds to paying down its debt, with the remainder allocated to share repurchases over time.
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