Profits Drop at Alliance Data as it Sues Blackstone

Alliance Data Systems, the bruised credit card issuer and processor that was left at the altar this week by the Blackstone Group, reported yesterday fourth quarter net income of $33.9 million, down 14 percent from $39.6 million in the fourth quarter of 2006. Revenues in the quarter rose to of $602.7 million, up 15 percent.

For the year 2007, revenue increased 15 percent to $2.3 billion compared to $2.0 billion for 2006. Net income decreased 13 percent to $164.1 million in 2007, compared to $189.6 million a year ago. Average managed credit card receivables rose to $3.9 billion at year end, up from $3.8 billion a year ago.

Alliance Data yesterday filed a lawsuit against Blackstone in the Delaware Court of Chancery, seeking to compel Blackstone to move forward on its proposed $6.8 billion purchase of Alliance Data (“Blackstone Backs Off from Alliance Data Deal,” Jan. 28, 2008). Blackstone walked away from the deal, saying it couldn’t meet the regulatory hurdles set by the U.S. Comptroller of the Currency for the takeover to be completed.

Looking ahead in 2008, Alliance Data said it does not expect any significant impact from higher loss rates; that its delinquency data has remained stable over the past few months; and that losses reached its “normalized levels of approximately 6 percent during the fourth quarter.”

In 2007, the firm’s private label card unit launched a program with the Spanish-speaking customers of computer maker Dell Inc., and signed a multi-year expansion and renewal agreement with Alon USA Energy, Inc., an independent refiner and marketer of petroleum products with annual sales exceeding $3 billion. The company’s Credit Services unit in 2007 lost client Lane Bryant.