J.C. Penney Company, Inc. Closes A New $2.35B Credit Facility

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J.C. Penney Company, Inc. (NYSE:JCP) announced that it closed a new credit facility that will provide more flexibility for the company when it needs cash for its business operations.  Observers in the retail industry have been monitoring its cash burn amid its turnaround efforts.

According to the struggling century-old retailer, it closed a new $2.35 billion asset-based senior secured credit facility consisting of a $1.85 billion revolving credit line and $500 million term loan. J.C. Penney Company, Inc. (NYSE:JCP) said it will use the revolving credit for general corporate purposes and working capital. It will also use the proceeds from the loan to pay down its cash borrowings from the previous credit facility.

Improved pricing terms

The retailer said the $2.35 billion senior credit facility provides better pricing terms and will replace the $1.85 billion facility, which is scheduled to mature in April 2016.

In a statement, J.C. Penney CFO Ed Record said, “We proactively pursued this new facility to extend the maturity several years and further enhance our liquidity position, particularly during periods of peak working capital needs. We are pleased with the improved pricing terms of this facility as well as the support and confidence from our banking partners.”

J.C. Penney’s Sales performance

Last month, J.C. Penney Company, Inc. (NYSE:JCP) reported that its same store sales climbed 6.2% to $2.80 billion, which exceeded its guidance of 3% to 5% growth. Its online business increased 25%. The retailer recorded two consecutive quarters of sales growth after sustaining nine consecutive quarter of decline.

Despite its sales growth, J.C. Penney Company, Inc. (NYSE:JCP) reported first quarter losses of $1.15 per share, but that was still better than its $1.58 losses per share recorded in the same period a year earlier. The improvement shows that CEO Myron Ullman’s turnaround strategy is working. He brought back sales promotions and coupons and revamped the retailer’s home goods section to attract customers.

Short interest

Meanwhile, the number of investors with short interest in shares of J.C. Penney Company, Inc. (NYSE:JCP) increased last month. About 80.8 million shares were held short as of May 30, an increase of 2.5% from the 78.9 million shares shorted on May 15. Approximately 26.8% of the company’s shares are sold short.

The stock price of J.C. Penney Company, Inc. (NYSE:JCP) is down by more than 3% to $8.70 per share today.

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