Alliance Data to buy Charming Shoppes' credit card ops

(Reuters) - Charming Shoppes Inc (CHRS.O) said it agreed to sell its private label credit card program to business services company Alliance Data Systems (ADS.N) to reduce debt.

The companies also entered into a ten-year agreement for the servicing of Charming Shoppes' private label credit card receivables program.

Under the deal, Alliance Data, a credit card processor, will buy existing accounts and the rights to new accounts and certain other assets of the retailer's brands for $140 million.

The retailer of women's plus-size apparel will receive $110 million in cash and $30 million will be utilized to fund the termination and exit costs, Charming Shoppes said.

The deal, which is expected to close before the year end, will reduce Charming Shoppes' debt by $110 million to about $50 million at the end of its third quarter, it said in a statement.

The Bensalem, Pennsylvania-based company, which announced job cuts and store closures earlier this year, has lowered capital expenditures and focused on inventory reductions to cut costs.

Dallas-based Alliance will handle credit card programs, portfolio and securitization master trust of the retailer's brands such as Lane Bryant, Fashion Bug and Catherines, representing $680 million in annual credit sales and $500 million in account receivables.

The securitization master trust will continue to be funded by $290 million of outstanding 2012 term bonds and a combination of existing and potential new conduit commitments, Alliance Data said in a statement.

Alliance Data's bank will also issue certificates of deposits. "As such, Alliance Data's excess liquidity capacity will remain relatively untouched," the company said.

Alliance Data's Chief Executive Ed Heffernan said he expects the transaction to double the growth rate of core private label business sales and portfolio to over 20 percent.

Charming Shoppes shares were up 6 percent at $5.37 Thursday morning on Nasdaq, while those of Alliance Data were up 3 percent at $58.43 on the New York Stock Exchange.

(Reporting by Mihir Dalal in Bangalore; Editing by Ratul Ray Chaudhuri)