Target Corp is temporarily suspending its efforts to sell its portfolio of credit card receivables and plans to restart talks with several potential buyers later this year after paying off financing it has with Chase.
Target Corp is temporarily suspending its efforts to sell its portfolio of credit card receivables and plans to restart talks with several potential buyers later this year after paying off financing it has with Chase.
Target Corp is temporarily suspending its efforts to sell its portfolio of credit card receivables and plans to restart talks with several potential buyers later this year after paying off financing it has with Chase.
Target said last January that it was actively pursuing a sale of the portfolio. As recently as late November, the company said it was in talks and a deal could be reached as early as the fourth quarter of 2011.
However, on Wednesday, Target signaled a change in course, saying that talks with a limited number of potential partners helped it determine that a pause in those talks and paying off financing it has with Chase would help it reach an agreement on acceptable terms later in 2012 or early in 2013. It gave no other details for the delay.
The company's credit card delinquency rates have improved this year. In December, only 3.1 percent of accounts had three or more payments past due, down from 4.2 percent a year earlier. Just 2.2 percent of accounts had four or more payments past due, down from 3.1 percent a year earlier.
Target's shares fell 1.9 percent to $48. 96 in morning trading on the New York Stock Exchange.
Target said it would retire financing it got from Chase Card Services, a unit of JPMorgan Chase & Co, for 2008 receivables, and that step would allow it to shop the portfolio around once talks with potential buyers resume. A payment related to that move will cut into the company's fourth-quarter earnings.
Target is only looking to sell the debts it is owed by cardholders. It would retain control of its credit card operations, which are part of a key marketing strategy.
Since 2010, Target has offered 5 percent discounts to shoppers who use its branded credit card. Last year, in another push to generate more sales, it added the incentive of free shipping for online orders placed with the so-called REDcard.
The discount retailer now expects a sale of the receivables to happen late this year or early in 2013 -- about a year later than originally planned.
Target said it will pay Chase about $2.8 billion to retire its financing now, before the expected payoff in late 2013. The payment and a make-whole premium will cut its fourth-quarter earnings by 8 cents per share. Earlier this month, Target forecast earnings of $1.35 to $1.43 per share for the holiday quarter.
Target expects to recoup some or all of the cost of the premium through lower expected interest expense in 2012 and 2013. (Reporting by Jessica Wohl in Chicago and Phil Wahba in New York; Editing by Gerald E. McCormick and Maureen Bavdek)
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