The likes of GE Capital, Beneficial Corp., and SPS Transaction Services, among others, have their eye on a new prey in the private-label credit card business.
As part a reorganization plan announced last month, the Limited Inc. is seeking strategic financial and marketing partners for its credit card bank, World Financial Network National Bank.
With $1 billion in outstandings and more than 13 million accounts, The Nilson Report ranked the Columbus, Ohio-based bank seventh among retailers that own their own receivables. Sears, J.C. Penney, May, Federated, Dayton Hudson, and Dillard have larger private-label programs.
David Robertson, president of the Oxnard, Calif.-based newsletter, said he expects the Limited to retain control over its credit card operation but allow an investor to take a minority interest.
"In the retail business, cards are an adjunct of the marketing arm of the retailer," Mr. Robertson said. "In the Limited's case, cards are there to sell apparel."
Robert Hammer, an investment banker in Newbury Park, Calif., suggested that the Limited has four options to consider: sell the private-label portfolio, securitize the portfolio to take the asset off the balance sheet and improve the capital ratio, enter a joint venture with an institutional player to fund assets or receivables, or use the business as a source of capital.
Also, the Limited could decide to get a marketing partner and migrate to a bank card portfolio, said Mr. Hammer. He added that MasterCard and Visa accounts would generate more income.
To date, the Limited has been content to keep its private-label card format, even as others, such as Nordstrom Inc., have issued cobranded cards.
Among the parties likely to be interested in the portfolio are General Electric Capital Corp., Household International, Associates Corp., Beneficial National Bank, and SPS.
If the Limited decides to spin off the credit card bank, "GE Capital is always one of the likely candidates," Mr. Robertson said.
GE Capital Retailer Financial Services, Stamford, Conn., is the nation's largest third-party, private-label credit card program with $12.8 billion in outstandings and 68.5 million cards, according to Nilson.
As part of its restructuring, the Limited would create two new entities. One is likely to contain its lingerie and personal care businesses: Victoria's Secret stores and catalogue, Bath & Body Works, Cacique, Penhaligon's, and Gryphon. The second entity would contain the women's apparel businesses: Express, Limited, Lerner New York, and Lane Bryant.
All of the receivables from these retailers' private-label credit card programs flow through World Financial Network National Bank.
