Target trumpets credit card deal, Wall St unsure

By Nicole Maestri

NEW YORK (Reuters) - Target Corp on Tuesday likened the credit card deal the discount retailer reached with JPMorgan Chase & Co (JPM.N: Quote, Profile, Research) to devising a dream financial services business with a dream partner.

But not all on Wall Street were as star struck, and shares of Target traded little changed on Tuesday, a day after the deal was announced.

Late Monday, Target said it would sell a 47 percent interest in its credit card business to JPMorgan Chase for an initial investment of $3.6 billion.

The deal means Target will still run its credit card business, which includes a namesake Visa card and a store card, and it will get cash to run its business.

JPMorgan gets the right to future profits from the business, and both companies would bear a share of net portfolio losses, if any occurred in the future.

"We expect to get hundreds of millions of dollars from profit from this venture unless we really screw it up," Chief Financial Officer Doug Scovanner said on a conference call with analysts. "Personally, I think this is what Dire Straits had in mind in the 1980s anthem, 'Money for Nothing.' I think this is wonderful."

Uta Werner, an retail analyst with Sanford C. Bernstein & Co, described the complicated structure of the deal as a "note sold to JPM, backed by a 47 percent undivided interest in Target's receivables, in exchange for cash proceeds of approximately $3.6 billion and subject to a profit and risk sharing agreement."

She said the arrangement gives Target a single major source of liquidity that will allow the retailer to implement its capital investments and $10 billion share repurchase program, which she viewed as "a positive."