-Executes Long-Term Services Agreement For Private Label Credit Card Receivables Program
-Company Schedules Second Quarter Sales And Earnings Conference Call For August 26, 2009
BENSALEM, Pa., Aug. 13 /PRNewswire-FirstCall/ -- Charming Shoppes, Inc. (Nasdaq: CHRS), a leading multi-brand apparel retailer specializing in women's plus apparel, and Alliance Data Systems Corporation (NYSE: ADS), a leading provider of loyalty and marketing solutions derived from transaction-rich data, today announced an agreement for the sale of Charming Shoppes' (the "Company") credit card receivables program to Alliance Data Systems Corporation ("Alliance Data"). Charming Shoppes and Alliance Data have also entered into a ten-year operating agreement for the servicing of Charming Shoppes' private label credit card receivables program. The Company expects the transaction to close before the end of the year, subject to attaining certain customary regulatory approvals.
Charming Shoppes expects to receive net cash proceeds of approximately $110 million related to the transaction. The transaction consists of the sale of Charming Shoppes' private label credit card portfolio, along with certain other assets and liabilities that are required to support these card programs, including Charming Shoppes' consolidated balance sheet asset "Investment in Asset-Backed Securities." Gross proceeds from the transaction are estimated at $140 million. Approximately $30 million will be utilized to fund the termination of contractual obligations related to the transaction and exit costs.
Charming Shoppes' Investment in Asset-Backed Securities are held on its consolidated balance sheet. Its off-balance sheet Series 2004-1 and Series 2007-1 securitization funding facilities are currently held in the Charming Shoppes Master Trust. Alliance Data will assume the operation of this Trust and all funding responsibility in support of the credit card receivables program.
Under the terms of the operating agreement, Alliance Data will assume operation of Charming Shoppes' private label credit card programs. This includes the operation of the Lane Bryant, Fashion Bug and Catherines credit card programs, which combined represent approximately 4.5 million active accounts generating approximately $680 million of annual credit sales, or 32% of the Company's retail stores nets sales for the trailing 12 months. Alliance Data will provide private label credit card services including account acquisition and activation; card authorization; private label credit card issuance; statement generation; remittance processing; customer service functions and marketing services, as well as receivables funding.
To ensure continuity in customer service and collections, Alliance Data plans to maintain and operate Charming Shoppes' existing Milford, Ohio facility, effective with the closing of the transaction. Charming Shoppes will continue to manage credit marketing strategy for its retail brands from its Bensalem, Pennsylvania headquarters.
Jim Fogarty, President and Chief Executive Officer of Charming Shoppes, Inc. commented, "We are extremely pleased to enter into this agreement with Alliance Data. Upon closing, the benefits of this transaction to Charming Shoppes and our shareholders will include:
- Further focus on our core business;
- Removal of financing risk associated with our credit card receivable securitization program and the credit risk of the underlying credit card portfolio;
- A projected $110 million reduction in our net debt position to approximately $50 million as of the end of our third quarter, and the attendant strengthening of our liquidity and financial flexibility;
- Achievement of these benefits in a non-dilutive transaction; and
- Partnering with one of the country's premier credit card providers.
Fogarty continued, "We view our private label credit card program as an integral component of our retailing strategy, and we place a high value on our relationship with our customers. With Alliance Data as our strategic partner, we believe we can continue to offer our customers superior service."
Eric M.
