Bloomberg News

J.C. Penney Said to Reduce Rate on $2.25 Billion Term Loan (1)

May 21, 2013

J.C. Penney Co. (JCP:US) cut the rate on a loan after increasing it to $2.25 billion from $1.75 billion, according to two people with knowledge of the matter.

The department-store chain looking to rebound from its worst sales year in more than two decades will pay interest at 5 percentage points more than the London interbank offered rate, down from an initial proposal of 5.75 percentage points, said the people, who asked not to be identified because terms are private. The lending benchmark will have a 1 percent minimum.

Goldman Sachs Group Inc. led the financing, which was offered to lenders at 99.5 cents on the dollar, compared with 99 cents initially offered, the people said.

The debt, due in 2018, began trading at 101 cents on the dollar today, according to information provider Markit Group Ltd.

Proceeds will be used to fund working capital requirements and “to amend, acquire or satisfy and discharge” its 7.125 percent notes due in November 2023, the Plano, Texas-based company said in an April 29 regulatory filing.

Standard & Poor’s lowered its rating on the loan to B- from B, to “reflect a decline in recovery estimates for term loan lenders because of the upsizing,” analysts led by David Kuntz wrote in a report today. The ratings firm grades the company CCC+, seven steps below investment-grade.

Moody’s Investors Service said the bigger loan wouldn’t affect its B2 grade on the debt or Caa1 corporate rating, according to a report today. The ratings company has a “negative” outlook on J.C. Penney, noting the retailer would “continue to experience a sizable cash flow burn in the second and third quarters of 2013.”

Last month, the company ousted Chief Executive Officer Ron Johnson and reinstated his predecessor Myron E. Ullman III. Sales last year had tumbled 25 percent to $13 billion, according to data compiled by Bloomberg.

To contact the reporter on this story: Krista Giovacco in New York at kgiovacco1@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.


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Companies Mentioned

  • JCP
    (JC Penney Co Inc)
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