Case | HBS Case Collection | April 1993 (Revised December 1994)

American Express TRS Charge-Card Receivables

by Andre F. Perold and Kuljot Singh

Abstract

American Express (TRS) Co. is considering a proposal to securitize a portion of their consumer charge-card receivables portfolio. In the past, they have relied exclusively on a captive finance subsidiary, Credco, to perform this function. The proposed securitization structure has been put forth by Lehman Brothers and relies heavily on the existing structure of credit-card receivables' securitizations. The growing asset-backed securities market presents TRS an opportunity to diversify its sources of funds--however, there are reasons to be cautious. Due to recent downgrades of American Express and Credco debt, the perceived financial weakness of credit-card receivable backed securities issuers, and the proposal's sophisticated securitization structure, TRS is concerned that 1) The market may perceive securitization as a sign of weakness; 2) The securitization may not be cost effective. Therefore, TRS has to decide whether or not to proceed with securitization at this time.

Keywords: Credit Cards; Restructuring; Borrowing and Debt; Financial Management; Financial Strategy; Debt Securities; Travel Industry;

Citation:

Perold, Andre F., and Kuljot Singh. "American Express TRS Charge-Card Receivables." Harvard Business School Case 293-120, April 1993. (Revised December 1994.)