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Target Corp said on Tuesday it had struck a deal to sell its credit card portfolio to TD Bank Group,finding a buyer nearly two years after the retailer first said it wanted to sell the business.
TD Bank will pay an amount equal to the gross value of the outstanding receivables when the deal closes. Right now,the gross value is about $5.9 billion.
Under a seven-year agreement,TD will underwrite,fund and own future Target credit card and Target Visa receivables in the United States. TD will control risk management policies and regulatory compliance,while Target will keep handling account servicing functions.
The deal,subject to regulatory approval and other closing conditions,is expected to close during the first half of 2013,the companies said.
A week ago,Target Chairman and Chief Executive Gregg Steinhafel said the company expected to find the right buyer for the credit card business by the end of the year.
Target first said it wanted to sell its receivables portfolio in January 2011,then put those plans on hold in January 2012,saying it would restart talks after paying off financing it had with JP Morgan Chase & Co.
Target said its third-quarter earnings would reflect a pre-tax gain of about $150 million as it changes the accounting treatment of its receivables from held for investment to held for sale.
It expects to recognize an additional pre-tax gain of $350 million to $450 million when the deal closes.
Target plans to use about 90 percent of the proceeds from the deal to reduce its net debt position,and use the remaining funds to repurchase its shares over time.
