J.C. Penney Company, Inc. (JCP) In Good Position To Refinance Debt By End 2015

J.C. Penney Company, Inc. (JCP) In Good Position To Refinance Debt By End 2015
By J.C. Penney (Brand New design website See article here) [Public domain], via Wikimedia Commons

An investment report released March 6th by Steven Ruggiero of R.W. Pressprich & Co. focuses on J.C. Penney Company, Inc. (NYSE:JCP). The report highlights both the stock and debt offerings of the venerable and currently beleaguered retailer, rating the stock as a Market Perform and the senior unsecured notes as a Buy.

J.C. Penney common stock rating

While not overly sanguine on the short-term prospects of J.C. Penney Company, Inc. (NYSE:JCP) stock, Ruggiero does see longer-term potential in the equity. “We believe that the JCP Common Stock trades full relative to its key department store competitors given its continued earnings risk at this stage of its turnaround. Notwithstanding our continued “Market Perform” Common Stock rating, some metrics relative to future expected sales indicate that there may be more upside to the Common Stock from today’s levels.”

J.C. Penney senior unsecured notes a Buy

The report is largely focused on the positive prospects for J.C. Penney Company, Inc. (NYSE:JCP) debt offerings. Ruggiero highlights several positive developments in the companies recent and near-future financial numbers. “We reiterate our “BUY” recommendation for the JCP senior unsecured notes. We have increased our FY14 and FY15 estimated adjusted EBITDA to $112 million and $476 million, respectively.”

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The R.W. Pressprich & Co. reports projects the firm will be “modestly Free Cash Flow negative in fiscal 2014 and 2015, but see upside potential in our earnings/cash flow model. Free Cash Flow is projected at ($57) million and ($124) million in FY14 and FY15, respectively.” Ruggiero also notes that these projections do not include asset sales.

Refinancing likely by 2015

Last but not least, Ruggiero also focuses on the possibility, or from his perspective, the likelihood, of J.C. Penney Company, Inc. (NYSE:JCP) undertaking debt refinancing within a year or so. “We continue to expect that JCP will have sufficient financial flexibility to refinance its 6.875% Senior Notes due 10/15/15. Further, we would not be surprised if the Company refinances its 7.65% Debentures due 8/15/16 at the same time as it takes out its 2015 maturity. We think that a first half 2015 refinancing is possible.”

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