Signet Jewelers Limited recently announced the completion of the process of sale of its existing non-prime receivables and implementation of a forward flow purchase arrangement for future non-prime receivables, bringing to a close its strategic plan to achieve a fully outsourced credit structure. The portfolio has been purchased by funds managed by CarVal Investors and Castlelake, L.P., Signet said.

At the same time, Signet emphasised that it was maintaining a full spectrum of category-leading financing and lease options for consumers.

According to a statement from Signet, the outsourced credit structure will allow it to enhance its strategic and operational focus on its core jewellery retail business as it executes the Signet Path to Brilliance transformation plan. In addition, the sale of the credit accounts receivable significantly reduces Signet’s balance sheet risk and lowers working capital needs, as well as enabling the company to return significant capital to shareholders, it added.

Of the company’s existing non-prime receivables, 70 percent has been sold to funds managed by CarVal Investors and the remaining 30 percent to funds managed by Castlelake, L.P. As previously announced, these two funds will also purchase newly originated receivables arising from Signet’s non-prime accounts at a discount rate as agreed earlier and in the same proportions.

Signet received $445.5 million in cash proceeds from this sale, net of a 5 percent holdback which may be paid out at the end of two years depending on performance. The Company said it expects to use the proceeds, along with cash on hand, to repurchase shares valued at $475 million in Fiscal 2019 of which $60 million was repurchased in the first quarter.

This transaction follows the previously executed prime credit transaction and strategic partnership with ADS, the implementation of Signet’s lease financing option through Progressive Leasing, and the outsourcing of the servicing of the non-prime credit programme to Genesis Financial Solutions, Inc.