Mid-turnaround, J.C. Penney boosts borrowing capacity
February 13, 2013 7:21 PM EST
Retailer J.C. Penney Co Inc
"As we enter the second year of our transformation, today's announcement reflects the confidence of our banking group in our long-term strategy and further strengthens our liquidity position as we continue to execute our plan," J.C. Penny Chief Financial Officer Ken Hannah said in a statement on Tuesday.
However, analysts expressed reservations about the move as it would increase the company's borrowing capacity from $1.75 billion to $2.25 billion.
The new arrangements included a $150 million increase in the credit facility's accordion feature to $400 million and a $250 million increase in an additional feature, analysts said. An accordion feature allows a borrower to expand a credit facility at a later date.
"The credit risk profile of (J.C. Penney) continues to escalate as the company potentially increases leverage to bring about a so far disappointing transformation strategy," BMO Capital Markets analyst Wayne Hood said in a client note.
There were no changes in credit terms or covenants, he said.
"These hurried actions are not indicative of a financially healthy company," said Carol Levenson, director of research, at Gimme Credit, an independent research service on corporate bonds.
The department store operator's existing credit agreement is the subject of a default claim by a group of bondholders.
J.C. Penney appeared to have taken extra measures to reassure its bank lenders, signing a "reaffirmation agreement" reiterating the guarantees and the grant of security interest under the credit agreement, Levenson said.
The company did not immediately respond to requests for comment.
Chief Executive Ron Johnson said last week the company would return to growth in 2013, despite severe sales declines in fiscal 2012.
Penney, which operates 1,100 department stores, began a turnaround a year ago that called for the elimination of most coupons and sales events. Long-term customers, trained for years to seek out discounts, balked at the new pricing strategy and reeled in purchases.
(Reporting by Jessica Wohl in Chicago and Lisa Baertlein in Los Angeles; Editing by Leslie Adler, Andre Grenon and Richard Pullin)
Most Popular Slideshows
- 2014 MLB World Series Game 1: San Francisco Giants 7, Kansas City Royals 1 [PHOTOS]
- 2014 MLB World Series - Game 2: Kansas City Royals 7, San Francisco Giants 2 [PHOTOS]
- NFL Thursday Recap - Denver Broncos 35, San Diego Chargers 21: Peyton Manning Has 3 TDs In Easy Win [PHOTOS]
- 2014 MLB World Series Game 3: Kansas City Royals 3, San Francisco Giants 2 [PHOTOS]
Join the Conversation
- Tourre on stand says email in SEC case 'not accurate'
- Syrian authorities blocking access to needy in Homs - Red Cross
- Faith in European Union at low ebb, EU poll says
- Former UBS banker gets 18 months, $1 million fine, for muni bid-rigging scheme
- U.S. judge halts challenges to Detroit's bankruptcy bid
- Xiaomi Redmi 1S vs. Sharp Aquos Crystal – Specifications, Features And Price Showdown
- Verizon Motorola Droid Turbo Leaked Live Images Surfaces, Scheduled To Get Unveiled On Oct 28
- Update HTC One M7 with LG G2 with Android 4.4.2 as Sprint OTA: Fixes and Installation
- U.S. Targets Buyers of ISIS Oil, Threatens Sanctions
- ISIS Syria Airstrike Bombing Has Killed 550 People, Civilians Included
- Russia Blocking OSCE Monitoring Of Its Border With Ukraine
- Russia Slams US 'Double Standards' In The Fight Against ISIS