Target Corp. said it would sell an interest in its credit card receivables to JPMorgan Chase for proceeds of approximately $3.6 billion.
The transaction is expected to provide Target with sufficient liquidity to implement its business plans without the need to access term debt capital this year. The deal was designed to not impact Target’s customers.
JPMorgan Chase has agreed to fund approximately 47% of Target’s expected receivables growth in the near term, subject to an aggregate limit of $3.9 billion of JPMorgan Chase’s capital invested in Target’s receivables.
Target will continue to control all aspects of creating and implementing its financial services strategy, provided that future portfolio performance remains sufficiently strong. In the event that the portfolio were to deteriorate in the future, JPMorgan Chase would gain certain rights to direct Target’s credit card team to implement alternative underwriting and risk management practices, until portfolio performance improved.
Target and JPMorgan Chase have agreed to share the expected profits from this arrangement pro rata to their respective ownership interests, subject to a cap.
Unless extended by mutual agreement, repayment of JPMorgan Chase’s invested capital is scheduled to begin on the fifth anniversary of the transaction closing.