Conn’s, Inc., an electronics and appliance retailer, said Wednesday it has securitized  $1.4 billion of retail installment contract receivables, with closing expected on or about Sept. 10.

This transaction, which is unrated, is the result of an exploration of strategic review announced last October. Proceeds from the sale of the loan portfolio to the securitization trust will enable the specialty retailer pay down its asset-based credit line and have approximately $380.0 million in cash on the balance sheet.

The company’s Board of Directors has also authorized the repurchase of up to $75.0 million of its outstanding common stock or senior notes.

Theodore M. Wright, Conn’s executive chairman said in a press release that the securitization “represents a significant milestone in diversifying the company’s capital structure” and is a “critical step in our progression to an asset-light business model.”

“The advance rate we received is a compelling indicator of the value of our loan portfolio,” Wright said.

Conn’s has yet to find a buyer for the residual interest, or equity, in the securitization; and it may elect to retain all or a portion of the residual equity in the securitized portfolio if determines that this is in the best interest of its stockholders.

Conn’s intends to execute periodic securitizations of future originated loans, including the sale of any remaining residual equity.

Conn’s will retain the servicing of the securitized loan portfolio and will collect a monthly fee of 4.75% (annualized) based on the outstanding balance of the securitized receivables. For the month ended August 31, 2015, the resulting servicing revenue to Conn’s is expected to be approximately $5.7 million. This amount will decline over time as the loan balances are paid off. In addition, Conn’s will retain all credit insurance income together with certain recoveries related to credit insurance and repair service agreements on charged-off accounts.

The company anticipates that the financial terms (advance rates and interest rates) of future securitization transactions will improve based on the following factors:

Future pools are expected to be recently originated receivables, which have traditionally had lower net losses as a percentage of the pool, than a seasoned pool;

There are higher amounts of anticipated future interest earnings to be realized from accounts which will ultimately be repaid;

Repeat issuers typically receive improved financial terms after their first transaction in the securitization market; and

The company anticipates obtaining ratings for its future transactions.

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