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Target puts plan to sell credit card receivables on hold
January 18th, 2012
MINNEAPOLIS – After about a year of active efforts, Target Corp. has decided to postpone its plan to sell its credit card receivables portfolio.
The discount store chain said Wednesday that it aims to restart talks with "a limited number of potential partners" later this year, when the company expects to be in a position to complete a sale on better terms.
In the meantime, Target plans to pay about $2.8 billion to retire receivables financing obtained from Chase Card Services in 2008. The retailer said Wednesday that retiring that financing before its planned payoff in late 2013 will enable it to market the credit card receivables when the company resumes partner discussions later in 2012.
"Our desire to sell the portfolio on appropriate terms remains the same today as it was when discussions began, but we believe that now is not the time to finalize a transaction," Doug Scovanner, executive vice president and chief financial officer at Target, said in a statement. "We believe a pause in discussions until later in 2012, combined with repayment of the Chase Card Services financing, will enable Target to reach an agreement with a high-quality financial partner on acceptable terms."
Target had announced last January that it would actively pursue a sale of its credit card receivables, aiming to complete a deal in late 2011 or early 2012. The company said Wednesday that it now expects to wrap up a transaction in late 2012 or early 2013.
The $2.8 billion payment to Chase includes a make-whole premium that stands to reduce fourth-quarter 2011 earnings per share by about 8 cents, according to Target. The retailer said it expects to recoup some or all of the cost of that premium via lower interest expense in 2012 and 2013.