Target Corp. said Wednesday that it is negotiating with an unnamed investment partner to sell an undivided interest in about 50 percent of its credit card receivables for an estimated $4 billion.
The Minneapolis-based retailer said a deal would “generate substantial liquidity” and might close during the second quarter, subject to various conditions.
Target, which is one of the last retailers to own and operate its credit card business, said in September that it was considering strategic alternatives for the unit. The move came shortly after activist investor William Ackman, who has a 9.6 percent stake in the company, pressed the chain to improve profits.
The company’s credit business includes REDcards, the Target Visa Card and Target Credit Card, gift cards and other financial services.
Last month, Deborah Weinswig, analyst at Citigroup Global Markets Inc., downgraded Target’s stock to “Sell,” partly because of risk in the company’s credit card portfolio.
Target’s delinquencies in its credit card business were up in January to 4.03 percent, compared with 3.89 percent in December and 3.83 percent in November, Weinswig said.
The credit component of Target’s business made it more difficult for investors to figure out how the company’s shares should be valued, and analysts have worried about the potential for increased delinquencies as the economy softened.
Credit markets have tightened since the subprime mortgage crisis last summer, which is a major factor in the current economic downturn.