Target Receivables Corp. amended its S-3 filing with the Securities and Exchange Commission last week, to issue up to $3 billion in retail credit card ABS through Target Credit Card Master Trust.
It's been over a year since the discount retail giant securitized a portfolio of credit cards. The past two deals - June 2002 and August 2001 - were both $1 billion in size, structured in a $750 million A class and a $250 million B class through Lehman Brothers.
So far this year, there have only been three retail card transactions, totaling about $1.4 billion, from Circuit City, Cabela's Inc., and World Financial Network. News in the sector has been varied. While the sale of Sears Credit Card Master Trust to Citibank tightened spreads on the retailer's card deals by 10 to 20 points, the bankruptcy /fraud spiral of The Spiegel Group may have damaged the playing field for other retail issuers.
According to ABS researcher Jeff Salmon at Barclays Capital, the Sears sale to Citibank is the first of an industry trend of consolidation that could spread to other names in the retail sector. Circuit City has already announced it intends to sell its banking arm, First North American Nation Bank. Other retailers that have issued in the past include Charming Shoppes, Saks and Neiman Marcus.
"You're seeing this recurring theme among the retailers that this is a tough business to be in," Salmon said. "Sears is the bellwether."
On the other hand, GE Capital Corp. has also filed to issue retail-backed credit card ABS. Perhaps the combination of two strong corporate names will offset the Spiegel mess and the disappearance of Sears.
GE and Household International (now a subsidiary of HSBC) own several retail portfolio cards, and would be natural suitors, Salmon said.
Servicer on the Target deal is the company's banking subsidiary Retailers National Bank. Target had a sporadic ABS program throughout the 1990s, issuing under its former corporate name Dayton Hudson, which was changed to Target Corporation in 2000.
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