Bloomberg News

Target Plans Bonds to Repay JPMorgan Credit-Card Receivables

January 10, 2012

(Updates with size of 10-year issue in second paragraph.)

Jan. 9 (Bloomberg) -- Target Corp. is tapping the corporate bond market for the first time since July as the second-largest U.S. discount retailer seeks to pay back obligations tied to its credit-card business.

The company may sell one-year floating-rate notes and $1 billion of 10-year fixed-rate debt to buy a note issued by a Target Card Owner Trust to JPMorgan Chase & Co., said a person with knowledge of the offering, who declined to be identified because terms aren’t set. Minneapolis-based Target is able to prepay principal on the note until Jan. 31, it said in its most recent quarterly filing.

Target, which sold almost half of its credit-card loans to JPMorgan for $3.6 billion in 2008, said in November it plans to make an announcement regarding the sale of receivables before Chief Financial Officer Doug Scovanner retires at the end of March. The company said last year that the performance of the portfolio and capital market conditions made an attractive opportunity to sell the receivables.

“The most likely form of such an announcement will be that we’ve reached an agreement with a buyer on both the terms of such a sale and on the nature of an ongoing arrangement with them as well,” Chief Executive Officer Gregg Steinhafel said on a conference call to discuss earnings in November.

Ackman Strategy

The 10-year notes may pay 102 basis points more than similar-maturity Treasuries, said the person with knowledge of the sale. That compares with an 80 basis-point spread Target paid on $1 billion of similar-maturity debt in July 2010, according to data compiled by Bloomberg.

Bill Ackman, founder of New York-based Pershing Square Capital Management LP, lost a boardroom battle more than two years ago in which he pushed Target to divest the card unit and separate its land holdings into a real estate investment trust. Excising credit cards would have stemmed the risk of rising non- payments by consumers during the worst economic crisis since the Great Depression, the hedge fund manager said. Target now favors a sale to fund store expansion in Canada.

Target last tapped the debt market in July, issuing $1 billion of three-year notes, Bloomberg data show.

France Telecom SA, the country’s largest phone company, auto and home insurer Allstate Corp. and Toyota Motor Credit Corp. are also planning bond offerings today, according to people with knowledge of those sales.

Paris-based France Telecom may sell $900 million of senior unsecured 30-year bonds for general corporate purposes at a 240 basis-point spread; Allstate, based in Northbrook, Illinois, may sell $500 million of 30-year debt at a 225 basis-point spread to pay back notes that mature next month and to buy back stock; and Toyota Motor Credit may issue five- and 10-year notes said the people, who declined to be identified because terms aren’t set.

--Editors: Mitchell Martin, Alan Goldstein

To contact the reporter on this story: Sapna Maheshwari in New York at

To contact the editor responsible for this story: Alan Goldstein at

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