|Diamond jewelry retailer Signet Jewelers Limited (Signet) has announced the completion of the first phase of the strategic outsourcing of its in-house credit program, which includes:
1. 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. Signet has entered into a seven-year program agreement with Alliance Data 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, says the announcement. Signet will receive future payments from Alliance Data under an economic-sharing agreement;
2. Outsourcing of the credit servicing function of its existing and future non-prime accounts receivable to Genesis Financial Solutions. This is part of 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; and
3. Implementation of a lease-purchase program in partnership with Progressive Leasing across Signet's 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 merchandise.
Signet's Chief Executive Officer Virginia C. Drosos says, "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."
Continues Drosos: "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 part of the outsourcing transactions, nearly all existing Signet team members supporting credit operations have reportedly 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.