J.C. Penney Co. Inc (NYSE:JCP) said today that it has successfully secured $500 million more in loans than the $1.75 billion it initially sought. The Plano, Texas-based retailer is trying hard to recover from the missteps of its former retailer Ron Johnson, and win back customers. The $2.25 billion loan is secured by a number of J.C. Penney properties including the company headquarters in Plano, distribution centres, stores and land.
Last month, J.C. Penney Co. Inc (NYSE:JCP) fired Ron Johnson after the horrendous consequences of his ambitious turnaround plan. The company recorded its worst annual sales in over two decades last year. J.C. Penney reappointed former CEO Mike Ullman as the new chief. Ullman said the loan gives the struggling retailer flexibility to pursue its restructuring plans and return to profitability.
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J.C. Penney Co. Inc (NYSE:JCP) has hefty bills as it revamps home departments in over 500 stores across the nation. The company said it will use the proceeds to pay off $243 million in notes and finance its operations.
J.C. Penney to Cut Rates on The Loan
The company will cut interest rates on a loan after raising $500 million more than expected, people familiar with the matter told Bloomberg. The department store chain will be paying interests at 5 percent above LIBOR rates, compared to the previous proposal of 5.75 percent over LIBOR. Goldman Sachs Group Inc. (NYSE:GS) is the main financier.
Standard & Poors reduced its rating on the debt from B to B- to reflect a decline in recovery estimates. The retailer itself is rated CCC+, seven notches below investment grade. In contrast, Moody’s Corporation (NYSE:MCO) said the bigger size of the loan will have no impact on its B2 rating. Moody’s has a negative outlook on J.C. Penney Co. Inc. (NYSE:JCP) because the rating agency thinks the company will keep experiencing a sizable cash flow burn in the second half of this year.
J.C. Penney Co. Inc. (NYSE:JCP) shares fell 1.37 percent to $18.72 at the end of the session.