Sears sells credit biz
July 16, 2003-- Home Textiles Today,
Hoffman Estates, IL — Sears' stock climbed this morning following yesterday's announcement that the company will sell its Credit and Financial Products business to Citigroup for about $32 million, a deal the retailer said will net $6 billion in pre-tax cash.
The retailer's stock rose 10.5 percent, to $38.65, in morning trading on the New York Stock Exchange — its highest level since news broke about its troubled credit division last October.
The companies agreed to a 10-year marketing and servicing alliance under which Sears expects to receive $200 million in annual payments from Citigroup based on new account and credit sales. Sears also said the deal should save $200 million in costs associated with the retailer's zero percent financing program, which Citigroup will absorb.
Standard & Poor's Ratings Services reacted to the news by lowering its corporate credit, bank loan, and senior unsecured ratings on Sears, Roebuck and Co. to "BBB" from "BBB+." It also removed Sears' ratings from CreditWatch with negative implications, where they were placed March 26. Standard & Poor's described the outlook as stable.
"For many years, Sears' credit business has been a vital factor in Standard & Poor's assessment of the company's overall credit rating. The downgrade reflects the absence of this historically important foundation to the credit rating and its operating income (approximately $1.5 billion in 2002), and a greater reliance on a retailing business that has a very challenging future," credit analyst Gerald Hirschberg said.
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