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Off Target Reporting

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by Felix Salmon
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Mar 13 2008 12:00am EDT

Off-Target Reporting

A lot of people are very worried about credit card debt right now: there's a feeling that it might be the next shoe to drop, now that people can't use home equity to pay off their plastic. So you can imagine my surprise when I found out this morning that credit-card receivables are being sold at twice their expected value:

Discount retailer Target Corp. said it is in talks to sell a half interest in an $8 billion credit-card portfolio for $4 billion, twice as much as analysts had expected, to an "investment partner" that it wouldn't identify...
In January, analysts forecast a sale would garner about $2 billion, if it went through at all. Credit-card companies have run into trouble as the economy continues to worsen, leading some to doubt an attractive deal was possible.

Except, it's not that analysts expected the half-interest to go for $2 billion, as this story implies. In fact, Target isn't selling its loans at a premium at all, as the Bloomberg story makes clear. The "twice as much" doesn't refer to the price for the half interest, it refers to the proportion of the total loans being sold. If anything were to have sold for $2 billion, it would have been a quarter interest, not a half interest.

If the WSJ had modified the "half interest" part of their lede, as opposed to the "$4 billion" part, there wouldn't have been a problem. To be fair, these things are always easier to spot in hindsight. But still, one expects better from the WSJ.

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