Target Confirms Card Portfolio on the Block

Target Corp. confirmed late yesterday it is considering the sale of its $6.9 billion credit card portfolio.

Target said in a statement that it plans to find whether the best approach would be for it or a financial institution to operate the portfolio that includes the Target Visa card, Target credit card, gift cards and other financial products.

Target said its review would be an “examination of possible differences in growth rates and credit risk exposure between the current direct ownership model and other possible ownership structures, the cost of debt and equity capital to fund our receivables, and current and future liquidity considerations.”

Target issues its card through its own Target National Bank.

The Minneapolis-based retailer noted in the statement that it intended “to maintain our core financial services operation.”

Target said it would also “re-evaluate its use of debt in its capital structure and its pace of share repurchases.”

Goldman Sachs is advising Target on the deal.

The portfolio had receivables of $6.9 billion on Aug. 4, the end of Target’s fiscal second quarter, up from $6.0 billion at the same time in 2006, Target reported.

The 90-day delinquency rate at quarter’s end was 2.3 percent, up from 2.2 percent in the previous year. Net write offs as a percent of average receivables was 5.4 percent, up from 4.6 percent a year ago.

The possible sale was first covered by TheStreet.com, reporting that Chief Financial Officer Douglas Scovvaner broached the idea at a recent Goldman Sachs conference.

Target operates 1,537 stores in 47 states.