MINNEAPOLIS–Target Corp. will sell nearly half of its credit card business to JPMorgan Chase for cash proceeds of approximately $3.6 billion. This interest would represent approximately 47 percent of the principal amount of Target’s outstanding receivables. The transaction is expected to close before the end of May.
Under the agreement, Target and JPMorgan Chase will share profits.
“This unique agreement accomplishes the goals set forth in the review of receivables ownership that we initiated on September 12, 2007,” said Doug Scovanner, executive vice president and chief financial officer of Target Corp., in a statement. “It provides significant liquidity to Target from a single source unrelated to debt capital markets, provides an appropriate sharing of the portfolio benefits and risks between Target and JPMorgan Chase, and allows our guests to continue to benefit from the creativity and expertise of the world-class team at Target Financial Services.”
“Target weighted its options, and rather than accessing the debt capital markets, it opted to satisfy its liquidity needs by selling a portion of the risks and benefits of its credit portfolio,” said Adrianne Shapira, a Goldman Sachs analyst, in a research note. “In light of today’s challenging macro backdrop … it seems as if Target weighted its options appropriately.”