Signet Outsources Remainder of Non-Prime Credit

RAPAPORT… Signet Jewelers has signed an agreement with a minority
purchaser for its non-prime credit, the retailer said Wednesday.

Global alternative-investment
firm Castlelake will buy 30% of the credit accounts, Signet reported Wednesday. The deal follows a separate agreement with CarVal in March to acquire approximately 70%. The contract with Castlelake will shift Signet to a fully
outsourced credit structure.

Signet has entered into a five-year partnership with
Castlelake, requiring the investment firm to buy 30% of any non-prime credit
the retailer accumulates during that time period.

Signet expects to close the agreement in the second quarter
of the current fiscal year, which ends January 2019. The retailer will receive $401 million to $435 million
from the sale.

The outsourcing will “significantly reduce consumer risk from
the balance sheet, reduce working capital and allow the company to return
significant capital to shareholders,” Signet said. “It also allows the company
to increase strategic and operational focus on its core jewelry retail
businesses.”

The outsourcing of both prime and non-prime credit will have a negative impact of $118 million to $133 million on its operating income for fiscal 2019, Signet said. Of that amount, it anticipates $60 million of the impact to occur in the first
quarter.

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