NEW YORK — The Neiman Marcus Group Inc. is selling its private label credit card accounts and related assets to HSBC-North America's Retail Services for about $640 million in what the companies said was "a strategic alliance to support and enhance the credit operations of Neiman's and its subsidiaries."
The purchase price for the credit card operation includes about $527 million in net cash proceeds and the assumption or repayment of an estimated $113 million of securitization liabilities. In addition, Neiman's said it would receive unspecified payments from HSBC based on credit sales.
The transaction could help finance the $5.1 billion acquisition of NMG by Texas Pacific Group and Warburg Pincus LLC, two private equity firms, and possibly provide capital for store openings and remodeling. The TPG acquisition has caused speculation about Neiman's future, and how the owners will shape the business and cover the debt load.
There is a growing trend among retailers to sell credit operations to propel growth and create healthier, less leveraged balance sheets. Federated Department Stores Inc., which is acquiring May Department Stores Co., said last week it would sell its credit portfolio and the May portfolio to Citigroup for $4.5 billion. Kohl's Corp. and Sears, Roebuck & Co. already have sold their credit operations, as well, among other chains.
Neiman's, which is known for its attention to customers and details, said it would continue to handle key customer service functions, including new account processing, transaction authorization, billing adjustments, collection services and customer inquiries. The retailer and HSBC also will enter into a long-term relationship, whereby Neiman's receives compensation for certain marketing and servicing activities.
Neiman Marcus and its Bergdorf Goodman division have a total of about three million accounts.
Selling off the credit portfolio, according to Arnold Aronson, managing director of retail strategies at Kurt Salmon Associates, "is a perfectly logical financial device to fund new investment and reduce debt." The credit card portfolio is "a big asset, and selling it does not decrease the value of the operating business. It's transparent to customers, and the sale has no negative effect to the business operations."
In a statement, Burt Tansky, president and chief executive officer of NMG, said, "Our customers can expect the same outstanding customer service they have always received from Neiman Marcus and Bergdorf Goodman, while HSBC will provide us with additional operational and marketing capabilities to support our continued growth."
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