Analyst Note| Michael Miller |
Alliance Data Systems announced that it intends to spin off its LoyaltyOne segment into a new company. After the spin-off, Alliance Data will be entirely focused on its credit card services and buy now pay later offerings, which generate more than 80% of its current revenue. During the process, Alliance Data expects that the new company will issue debt and use the net proceeds to pay a dividend to Alliance Data, which will use the funds to reduce its own corporate debt. Current shareholders of Alliance Data will receive 81% of the new firm, while the company retains the remainder with the intent being to eventually monetize its position to fund further debt reduction.