Signet Jewelers Completes Fist Stage of Finance ProgramOctober 24, 17
(IDEX Online) – Signet Jewelers Limited has announced the completion of the first phase of the strategic outsourcing of its in-house credit program.
- The sale of its prime-only credit quality accounts receivable to the Columbus, Ohio-based card services business of Alliance Data Systems Corporation for par value of $960 million at the time of closing;
- Outsourcing of the credit servicing function of its existing and future non-prime accounts receivable to Genesis Financial Solutions (“Genesis”); and
- Implementation of its lease-purchase program in partnership with Progressive Leasing.
Virginia C. Drosos, Chief Executive Officer of Signet, said: “The successful completion of the first phase of strategic outsourcing of our credit portfolio has allowed us to reduce our outstanding debt and return capital to our shareholders. In addition, the transaction enables us to optimize our business model with greater organizational focus on driving the growth of our OmniChannel retail platforms and delivering a true Customer First experience.”
Drosos added: “A key priority of our credit transaction has been to minimize impact on our credit customers and substantially maintain our net sales. This has been achieved through our partnership with Alliance Data and Genesis to continue to provide the full suite of our credit offerings for our customers, and adding an incremental lease-purchase financing option with Progressive Leasing. I want to thank our partners and Signet team for their hard work in executing this complex transaction on time.”
As previously announced, Signet and Alliance Data have entered into a seven-year program agreement under which Alliance Data will become the primary provider of credit, including funding, underwriting, servicing and associated program functions, to Signet’s U.S. stores. Signet will receive future payments from Alliance Data under an economic-sharing agreement.
Signet and Genesis have entered into a five-year servicing agreement, under which Genesis will provide credit servicing functions for Signet’s existing non-prime accounts receivable, as well as future non-prime account originations. Signet will retain the existing non-prime accounts receivable on its balance sheet and continue to originate the majority of new accounts until the expected completion of the second phase of credit outsourcing.
Finally, Signet implemented a lease-purchase program in partnership with Progressive Leasing across its U.S. stores. Lease-purchase is an incremental payment option available for customers who do not qualify for Signet’s credit programs, or do not wish to pursue a credit option to finance the purchase of our merchandise. Signet believes the program represents an incremental growth opportunity.
As part of the transaction, nearly all existing Signet team members supporting credit operations have been transferred to Alliance Data or Genesis, or retained by Signet to facilitate a smooth transition for Signet’s team members and customers.
In the first phase of strategic outsourcing of credit, Signet completed the sale of approximately 55% of its credit portfolio to Alliance Data and outsourced servicing of its full credit programs. Signet is in ongoing discussions with several interested funding partners related to the second phase, which is expected to be completed in the first half of calendar year 2018. In the second phase, Signet expects to sell remaining accounts receivable on its balance sheet at the time of the transaction and fully outsource new account originations to a third party.
Signet received $960 million from the sale of its prime-only accounts receivable to Alliance Data. As previously indicated, Signet directed the sale proceeds to fully repay its $600 million securitization facility and repurchase shares earlier in the year based on opportunistic market conditions. In the second quarter of Fiscal 2018, the company repurchased 12% of its outstanding shares using cash on hand and revolver borrowings. Therefore, the remaining $360 million of sale proceeds will be used to repay the $350 million short-term loan used to finance the R2Net acquisition, which would otherwise be financed through revolver borrowings.