Richmond, Va. - Circuit City Stores has entered an agreement to sell its bankcard portfolio to FleetBoston Financial for about $1.3 billion.
Circuit City estimates the total portfolio, which includes Visa and MasterCard receivables and related cash reserves, totals about $1.5 billion.
The retailer expects the sale will result in an after-tax loss of about $89 million, compared with its mid-September estimate of $105 million. The retailer anticipates that the net after-tax cash proceeds from the sale will be about $282 million. Closing of the sale, which should be completed by the end of the year, is subject to regulatory approvals.
'The sale of the bankcard portfolio will enable us to focus our attention on the revitalization of our Circuit City stores and create a much simpler investment picture for our shareholders,' said chairman/CEO Alan McCollough.
In the second quarter, Circuit City recognized $95 million of its then estimated after-tax loss to reduce the carrying value of the company's retained interest in the bankcard portfolio, to reflect its estimate of net proceeds from the planned sale.
About $13 million of the $16 million reduction in the expected after-tax loss will be reflected in the company's third fiscal quarter.
The retailer now anticipates that other costs, including lease termination and severance, will be about $7 million after tax, or $3 million lower than its mid-September estimate of $10 million.