Multichannel apparel merchant Charming Shoppes Inc. has agreed to sell its private label credit card receivables to Alliance Data Systems Corp. At the same time, the companies have entered into a 10-year agreement for Alliance Data to assume operation of the private label credit card receivables program. Charming Shoppes said it expects gross proceeds from the deal will be approximately $140 million, of which Charming Shoppes will use approximately $30 million to fund the termination of contractual obligations related to the transaction. Charming Shoppes expects the deal to close before the end of the year.
The transaction will enable to Charming Shoppes to focus on its core retail business while removing the financing and credit risk associated with a credit card program. In addition, Charming Shoppes will use the $110 million in net proceeds to reduce its debt.
Under the terms of the operating agreement, Alliance Data will assume operation of the Lane Bryant, Fashion Bug and Catherines credit card programs. Combined these programs represent approximately 4.5 million active accounts generating approximately $680 million of annual credit sales or, 32% of Charming Shoppes’ retail stores net sales for the past 12 months.
Alliance Data will provide account acquisition and activation, card authorization, private label card issuance, statement generation, remittance processing, customer service functions, marketing services and receivables funding.
Alliance Data plans to maintain and operate Charming Shoppes’ existing credit card customer service center in Milford, OH. Charming Shoppes will continue to manage credit marketing strategy for its retail brands.
Charming Shoppes will receive annual payments from Alliance Data, based on credit sales generated by the private label credit card portfolio. Alliance Data will also assume the obligation to operate the Charming Shoppes Master Trust, through which the credit card receivables are financed.