GE Capital will service but not securitize the credit card collateral it recently acquired from J.C. Penney, according to a source at the firm, thus ending all asset-backed financing associated with the clothing retailer for the foreseeable future.

The sale of Penney's $3.8 billion to $4 billion card portfolio, underlines a trend among midsize and private label credit card providers to sell off their card function in what has turned into a costly, hyper-competitive business over the last year.

Recently, both MBNA Corp. and Chase Manhattan Corp. purchased large card portfolios from modest size, regional banks, though neither would comment about the potential for securitizing the collateral.

MBNA got $1.5 billion in card loans from SunTrust Banks Inc., while Chase acquired $535 million of credit card receivables from Huntington Bancshares.

In the case of J.C. Penney, GE Capital said it will not securitize the collateral because it was "not something they're on about," a spokesman said. A source close to the company said that because of GE's size, and the fact that credit card collateral is usually so liquid, securitization is only one of other perhaps less costly capital-raising options.

For J.C. Penney, the sale will end a 10-year presence in the ABS market. The company first priced a credit card deal in 1988 for $250 million, and sold what looks to be its last deal last year for $792 million.

"It would be up to GE Capital to make the decision on whether or not to securitize that debt," said Michael Dastugue, assistant treasurer at J.C. Penney, "because we sold our receivables portfolio to them, and they will be taking over the servicing of our master trust.

"Frankly, the cash that we're going to receive from the credit card sale doesn't require us, or would we necessarily have the need for an asset-backed financing any time in the near future," he said.

All of the purchasing agreements establish agent bank relationships, where the SunTrust, Huntington and J.C. Penney names will remain on the cards, but the buyers will own and service the accounts.

Private label and mid- to small-sized card issuers have been crunched by larger issuers that, in an extremely competitive environment, have offered teaser rates as low as 4% to 0% to lure an increasingly savvy, cost-conscious consumer base back into their fold.

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