Circuit City announced this morning its intention to sell the bank card unit of its consumer finance operations. Circuit City has hired Banc of America Securities to manage the portfolio sale. The proposed sale is for roughly half of Circuit City's $3 billion managed receivables and does not include its private lable or co-branded visa credit card receivables. The company anticipates the sale will result in a $200 million after-tax charge, which will be realized in the quarter ending Aug. 31, 2003. The sale is expected to bring in $190 million in cash.
"We believe that a sale to another entity, which could derive value from this type of operation, would enable us to avoid the large cyclical profit swings that are inherent in finance operations serving primarily non-prime accounts and that we have experienced in recent periods," said Circuit City chairman, president and chief executive officer W. Alan McCollough. "Equally important, we believe the sale of the operation would increase our financial flexibility by eliminating the use of cash to finance such an operation."
Barclay's Capital researcher Jeff Salmon, in an email on the subject said, "there are currently 3 deals totaling $1,1bn issued and out-standing out of CIRMT. Current portfolio performance is strong and stable. We believe GE Capital or Household are most likely acquirers of the bank credit card portfolio."