The consolidation trend in credit card issuers continues. Citing decreased profitability and a desire to focus on its core retailing business, Circuit City is shopping $1.5 billion of its direct-mail originated bankcard accounts. The retail giant is open to selling its private label and co-branded Visa portfolios as well, although the strategic role they play in its core retail business makes that less likely.
The list of potential suitors is currently cloudy, although Circuit City Chairman, President and CEO Allen McCollough indicated that several firms have expressed interest. He put the anticipated sale price at $190 million - an admittedly arbitrary number - which would lead to a $200 million los, to be realized primarily in the quarter ending Aug. 31, 2003.
Circuit City's estimated $190 million sale price, combined with the stated assumption that the expected loss would be realized so soon indicates that a sale may be imminent.
Chargeoffs have risen to roughly 16%. Ambac, which insures the two outstanding First North American National Bank securitizations, would need to approve the sale. FNANB currently has two credit card ABS outstanding, series 2002-A and 2003-A, totaling $1.02 billion.