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Ackman Down Over $180MM On JCPenney As CDS Crosses 1000 bps

Tyler Durden's picture


While last night's earnings (and conference call) were anything but promising, credit markets appear to have grown even more concerned about JCP's future than the equity market. As Barclays notes that JCP will "likely need bridge liquidity", CDS on JCP has surged 90bps crossing the worrying 1000bps level (+1.5pts to 15pts upfront), implying fears of insolvency growing very fast. With Groupon having lost a quarter of its market-cap this morning, it appears JCP is not be outdone as it stock (and Ackman's dreams) cross the down 20% mark. The question is - will Icahn provide the DIP financing? Finally: why, oh why, can't JCP just expand its multiple a few turns: works for the S&P every day, and after all it's not like cash flow, or rather lack thereof, matters in the New Normal.

Via Barclays Credit:

We are reaffirming our Underweight recommendation on JCP. We expect sales trends, traffic, and margins to remain negative through the next two quarter as JCP undertakes the repositioning of its Home department, which we expect to be disruptive to the selling floor. JCP indicated it plans to continue to fund the transformation out of operating cash flow; however, we believe JCP is likely to need to bridge liquidity (or simply source liquidity) through drawing its credit facility by the second quarter. We fundamentally remain skeptical that the company will be able to drive the  “trendsetters, starry-eyed, and sexy” (to use the company's branding of these targeted customers), into the shops (it is doubtful that this demographic knows what a pre-print advertisement is, in our view).

JCP -20%...


CDS trades points upfront but equivalent over 1000bps running now... while credit and equity trade in a non-linear fashion, the divergence is clear...


Charts: Bloomberg


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Thu, 02/28/2013 - 11:12 | 3285680 Bam_Man
Bam_Man's picture

Chief Brody to Capt. Ackman:

"You're gonna need a bigger boat."

Thu, 02/28/2013 - 11:25 | 3285740 RougeUnderwriter
RougeUnderwriter's picture

Hooper drives the boat, Chief

Thu, 02/28/2013 - 11:13 | 3285688 francis_sawyer
francis_sawyer's picture

I hope Ellen DeGeneres got paid in 'shares' for the endorsement... [with a 5 year lockup]...

Thu, 02/28/2013 - 11:13 | 3285695 Mugatu
Mugatu's picture

God its great to see this asshole get his ass reamed two different ways!

Thu, 02/28/2013 - 11:19 | 3285718 FecundaGoat
FecundaGoat's picture

He's definetly a 2 input man.....

Thu, 02/28/2013 - 11:24 | 3285738 TruthInSunshine
TruthInSunshine's picture

It would be very pleasing to see Ackman get decimated on JCP and Icahn get decimated on the Herbalife "You Sell Our Worthless Shit To Family, Friends & Whomever You Can Extract Pity From" fraud-scam.

Thu, 02/28/2013 - 11:52 | 3285844 buzzsaw99
buzzsaw99's picture

they aren't relatives, they are business opportunities to be exploited

Thu, 02/28/2013 - 12:31 | 3286046 NoDebt
NoDebt's picture

Ackman's on the wrong side of both trades.  Right about now he should be loading the revolver, cocking the hammer back and pointing it at his head.

Thu, 02/28/2013 - 12:41 | 3286117 TruthInSunshine
TruthInSunshine's picture

Don't ask me to buy any Herbalife "product" from you bro.

I'm gettin' sick of the Girl Scout Cookie & "will you pledge-per-mile-walked/ran/crawled a-thon for my kid's school" bullshit.

Thu, 02/28/2013 - 13:56 | 3286472 DeadFred
DeadFred's picture

Maybe he can get a bridge loan from Carl. I'm guessing he's pretty flush right now.

Thu, 02/28/2013 - 11:34 | 3285781 LasVegasDave
LasVegasDave's picture

What's with the Ackman Hate?

(Yeah, I get he's a Yid...)

But he uses private money, unlike Banksters, and he's out taking risks with his and other people's money.

Is that kind of thing evil unto itself?

Thu, 02/28/2013 - 11:36 | 3285795 TruthInSunshine
TruthInSunshine's picture

Justifiable guilt-by-association. Ackman's just a smoother, better mannered version of Icahn.

Thu, 02/28/2013 - 12:41 | 3286068 francis_sawyer
francis_sawyer's picture

Icahn never got the "metrosexual" thing going...


You might be 'metrosexual' if:

- Your nom de plume is kito & you look like you can't pass by a Banana Republic without stopping in for a purchase


@LVD ~ Welcome back!... I'm glad to see you've finished "un-winterizing" Sheldon Adelson's pool... Must have been a big job...

Thu, 02/28/2013 - 12:30 | 3286039 Freddie
Freddie's picture

I can recall a REIT that Ackman took over and he screwed the shareholders.  The REIT was not a great perfromer but was holding his own.  Karma is real about 90% of the time.

Thu, 02/28/2013 - 22:19 | 3288689 StychoKiller
StychoKiller's picture

Check out Dharma...

Thu, 02/28/2013 - 13:37 | 3286388 azzhatter
azzhatter's picture

Personally I don't like pussified bankster type dudes like Ackman

Thu, 02/28/2013 - 15:14 | 3286903 mac768
mac768's picture

.. now he needs to double down on his HLF short bet to get even :)

... unless Icahn the Black Knight gets into the arena :)


....... before the end of another great empire

Thu, 02/28/2013 - 11:16 | 3285702 Agent P
Agent P's picture

I overheard Ichan say JCP was a ponzi scheme.

Thu, 02/28/2013 - 11:17 | 3285710 francis_sawyer
francis_sawyer's picture

all paper is ponzi in the end...

Thu, 02/28/2013 - 11:16 | 3285706 BlueStreet
BlueStreet's picture

Icahn was calling him Axman on CNBC, pretty fitting today as his investors are definitely getting the ax taken to their accounts. 

Thu, 02/28/2013 - 11:17 | 3285707 dick cheneys ghost
dick cheneys ghost's picture

paging JC Penny, paging JC Penny...................Montgomery Ward on line 1

Thu, 02/28/2013 - 11:20 | 3285724 francis_sawyer
francis_sawyer's picture

 Robert Stack: "Passengers sure to die ~ Airline negligent"

Jonny: "There's a sale ON Penny's!"

Thu, 02/28/2013 - 14:05 | 3286532 DeadFred
DeadFred's picture

Dang! This is no joke. I used to know a bunch of KMart jokes and they all get blank stares now. Same goes with the Monkey Ward jokes. Now my Penny's jokes are threatened? I tell it's a plot against me and my maturity-challenged memory.

Thu, 02/28/2013 - 22:21 | 3288698 StychoKiller
StychoKiller's picture

C'mon, how's yer J.W. Woolworth stawk holding up? :>D

Anyone have fond memories of "The May Company?"

Thu, 02/28/2013 - 11:18 | 3285711 The Answer Is 42
The Answer Is 42's picture

Tyler, did you pick up that US basketball team just tied with North Korea 110:110, complete with cheerleaders with short skirts and pompoms? Is there a news blackout on this? Nuclear test pays. Watch out for Iran.

Thu, 02/28/2013 - 11:18 | 3285713 RougeUnderwriter
RougeUnderwriter's picture

Penny describes what the stock price is going to be shortly

Thu, 02/28/2013 - 11:54 | 3285853 francis_sawyer
francis_sawyer's picture

only 1983-present need apply...

Thu, 02/28/2013 - 11:18 | 3285716 HD
HD's picture

Well now we know how bad off you have to be to make Sears look good...


Thu, 02/28/2013 - 12:27 | 3286025 McMolotov
McMolotov's picture

What the hell happened with Penney's?

I'm not an old guy, only in my mid-30s, and I remember the stores actually being decent at one time. Over the past ten years, it's almost like they've done no maintenance of any kind. Carpet stains everywhere, holes in the walls, dressing rooms with broken doors... Not to mention they have several different check-out areas around the store but there's usually only one person available, and it's typically either a 20-year-old who's clueless or some old woman in her 60s who looks like she's only working because otherwise she wouldn't be able to pay for her diabetic supplies.

They really went to shit, and the way they've declined over the years is representative of what's happened to the entire country. Depressing as hell.

Thu, 02/28/2013 - 12:35 | 3286075 N. B. Forrest
N. B. Forrest's picture

It's been taken over and run by a bunch of shit packers. 


They may all be screwing each other and having a jolly good time, but they don't know what normal Americans like. 

Thu, 02/28/2013 - 11:24 | 3285717 Dr. Engali
Dr. Engali's picture

I look forward to seeing him go on CNBS and try to convince the world how he is right and the market was wrong after JCP goes bankrupt.

Thu, 02/28/2013 - 11:20 | 3285721 SheepDog-One
SheepDog-One's picture

So at least SOME of the insider heavy hitters are taking it up the kornhole in our 'Step right up and place ya bets! Everyones a WINNA!' totaly broken markets. Someone have it our for Ackman?

Thu, 02/28/2013 - 14:08 | 3286548 DeadFred
DeadFred's picture

Normal social interactions for sharks.

Thu, 02/28/2013 - 11:19 | 3285723 cxl9
cxl9's picture

Hanlon's Razor not withstanding, no one could possibly be this incompetent. I wonder who paid this guy Johnson to fly JC Penny into the ground.

Thu, 02/28/2013 - 11:20 | 3285729 Sudden Debt
Sudden Debt's picture

And for more interesting stuff:



Thu, 02/28/2013 - 11:31 | 3285770 SAT 800
SAT 800's picture

But, of course, this news is BULLISH ! The freaking S&P is rallying again. I'm going back to my lifelong position of amused spectator. These people really are crazy.

Thu, 02/28/2013 - 11:33 | 3285772 Frozen IcQb
Frozen IcQb's picture

FINALLY, some info that’s worth the watch.  Educational too.

Dagn! those buffalo wings look good.


Thu, 02/28/2013 - 11:33 | 3285777 SAT 800
SAT 800's picture

What's your take on business in Europe? I think the French economy is starting to smell like cheese that's past it's "sell by" date? What do you see?

Thu, 02/28/2013 - 12:15 | 3285952 Sudden Debt
Sudden Debt's picture

Well, these last 2 weeks everything is grinding to a halt.

It's just weird BIGTIME!

It's like every business is now faced without a order wallet.

And all at the same time!

Industrial output is dropping over 20% here in Beglium overall and our French branch itself is almost nearing bankruptcy. They are sitting on a loss of 35% this year already.

And as we supply maintenaince tools and supplies for metal and machine building and repair. That counts.

It's bad. What can I tell you. Even the strongest sectors are pulling back.

Over here, most people realize we'll get 2008 all over again because we get all the same signs and that also puts a brake on consumption.


Thu, 02/28/2013 - 22:25 | 3288714 StychoKiller
StychoKiller's picture

Ya keep beatin' the dog and then you expect it to come when you call?

Thu, 02/28/2013 - 11:21 | 3285730 Glass Seagull
Glass Seagull's picture

Icahn is cackling somewhere

Thu, 02/28/2013 - 11:22 | 3285735 Tinky
Tinky's picture


Thu, 02/28/2013 - 11:23 | 3285737 FJ
FJ's picture

Best price Friday.....already on Thursday?

Thu, 02/28/2013 - 11:24 | 3285739 fuu
fuu's picture

What was that trick BAC used to book the drop in stock price and rise in CDS?

Thu, 02/28/2013 - 11:33 | 3285779 fonzannoon
fonzannoon's picture

You mean DVA?

BAC just sits there with a hand gun and is ready to point it at their head and yell "I'm Gonna do it!"

If JCP yelled that no one would give a shit.

Thu, 02/28/2013 - 11:39 | 3285801 fuu
fuu's picture

That's the one.

Thu, 02/28/2013 - 11:24 | 3285742 Bam_Man
Bam_Man's picture

Michael Ray Richardson to Coach Ackman:

"Da ship be sinkin'."

Thu, 02/28/2013 - 11:25 | 3285744 Shevva
Thu, 02/28/2013 - 11:38 | 3285799 SAT 800
SAT 800's picture

The Spanish are special; during the Spanish Civil war, which was kind of a dress rehearsal with live ammo. for WW11; the spanish revolutionaries boxed up the entire Spanish Central Bank Gold Reserves in wooden crates and shipped it to Moscow, so their "Comrade" and "fearless Leader", Stalin could watch over it for them, they were worried the Nationalists might retake Madrid, which they were temporarily holding. Stalin cracked up when the ship arrived; and said, "Well, they'll never see this Gold again"; and they never did. 19 Billion; pfffht. They can do better than that, I'm sure.

Thu, 02/28/2013 - 11:29 | 3285751 buzzsaw99
buzzsaw99's picture

111 years old and nothing but debt. Buy stocks for the long run, they are a great investment in the future. They don't even own their stores. ma and pa kettle were wiser than jcp. lulz

Thu, 02/28/2013 - 11:45 | 3285816 SAT 800
SAT 800's picture

Well, it's common knowledge that if you just leave your savings in the Stock Market, you'll retire rich. I can't even remember how many adult American Citizens I tried to talk out of this nonsense. But, the propaganda really works, and people are always willing to believe what they want to believe. It's March 1st., now; so all the 401K plan managers will be dumping millions in the stock market; just like they do every month. You'd think, by now; people would have wised up and cancelled these plans; but nooh! A great investment in the future would be Silver Bullion; or Silver American coinage.

Thu, 02/28/2013 - 11:57 | 3285870 buzzsaw99
buzzsaw99's picture

Most public companies end when insiders have sucked every last dollar out and left shareholders er, bagholders, with nothing.

Thu, 02/28/2013 - 12:40 | 3286110 SamuelMaverick
SamuelMaverick's picture

Most public companies end a slow agonizing death when they are no longer run as a business whose primary goal is to provide a good or service.  They die when MBA employee pucks with degrees start running things for what they consider is the bottom line only.  They dont have the mental capacity to understand the primary mission of their business is to provide a quality product or service to whatever specific customer they are serving, and to do so with a reasonable profit. These idiots with Ivy league MBA's can take any great business, and completly wreck it within a few short years.  They focus on " the bottom line " and 'cutting costs' to get the next quarterly statement to look better with no thought to the short or long term consequences to the business' long term success or survival.  The idiots at JC Penney dont even understand their own customers (middle class and upper middle class) and what kept them coming back year after year.    

Thu, 02/28/2013 - 13:22 | 3286334 fuu
fuu's picture

Pournelle's Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people: those who work to further the actual goals of the organization, and those who work for the organization itself. Examples in education would be teachers who work and sacrifice to teach children, vs. union representative who work to protect any teacher including the most incompetent. The Iron Law states that in all cases, the second type of person will always gain control of the organization, and will always write the rules under which the organization functions.

Thu, 02/28/2013 - 11:26 | 3285753 Pseudo Anonym
Pseudo Anonym's picture


Thu, 02/28/2013 - 11:27 | 3285757 BurningFuld
BurningFuld's picture

JCP indicated it plans to continue to fund the transformation out of operating cash flow;  What the fuck does this mean exactly!

Thu, 02/28/2013 - 11:38 | 3285798 buzzsaw99
buzzsaw99's picture

It means jcp is down at the pawn shop selling the big screen to pay the rent.

Thu, 02/28/2013 - 11:29 | 3285760 CheapBastard
CheapBastard's picture

Are you just happy to see me or are those Bankruptcy papers bulging in your pocket?


The malls get more deserted by the day of any meaningfull shoppers. The only places doing a decent business are the food courts since no one is going to stop people from gorging themselves on Fast Food and horsemeat. Once those go empty the mall will collapse comletely and shut the doors.

Thu, 02/28/2013 - 11:29 | 3285763 Larry Darrell
Larry Darrell's picture

I thought everyone was making up on volumes?


Thu, 02/28/2013 - 11:31 | 3285769 dobermangang
dobermangang's picture

JCP needs a Ruger boutique, a Glock boutique, a Smith and Wesson boutique, an ammo boutique.... and they might do well.


Thu, 02/28/2013 - 22:29 | 3288728 StychoKiller
StychoKiller's picture

Whoa!  A flash of brilliance:  "Designer Holsters!"

Thu, 02/28/2013 - 11:42 | 3285809 adr
adr's picture

What JCP needs to do is start signing up people to buy merchandise and sell it to thier friends. Then JCP stock will double in a couple days, problem solved.

You would think with all the Benny Bux flying around there wouldn't be issues with cash flow. But EVERY retailer is having massive cash flow problems.

You want to know why shelves are bare? They can only afford to buy two or three units of inventory. The next problem is the profit off the two or three units isn't enough to buy any more.

EBT can only do so much. It is also killing Walmart in ways they didn't foresee. Did you know you can return food? I learned a good way to get some cash for crap from a nice welfare lady.

She gets WIC money, EBT money, and SNAP. She buys cartloads of food at a Walmart Supercenter and then goes straight to customer service and returns it. The returns are put on a Walmart debit card. Now she has a couple hundred bucks to spend on anything she wants.

The big problem for Walmart is the food is perishable and must be thrown out if it doesn't sell. More and more welfare queens are getting in on the scam. When one figures out a way to get some more money, the rest find out quickly.

Thu, 02/28/2013 - 11:46 | 3285823 Son of Loki
Son of Loki's picture

AMWAY? Oh crap. I hate when they bug me with's almost as bad as the herbalife soccer single mother mom down the street bugs us with her "live long" snake oils.

Thu, 02/28/2013 - 11:50 | 3285837 SAT 800
SAT 800's picture

That's sick. what a fucking country. "Bamma gone buy me a phone!". Jesus Christ.

Thu, 02/28/2013 - 12:25 | 3286007 orangedrinkandchips
orangedrinkandchips's picture

Bride loan.....of course...WITH NEGATIVE CASH pay me millions!

Thu, 02/28/2013 - 12:33 | 3286044 ebworthen
ebworthen's picture

Why is J.C. Penney really cooked?

Ron Johnson.

On part of the conference call he was excited about every associate being trained on an iPod, and using them to ring up customers in the aisles.


Getting rid of it's conservative image, going to "jcp", and Ellen DeGeneres were bad enough, but having people trained on an iPod, and ring purchases for customers with an iPod is going to turn things around!?!?


What a shame, what a tragic shame that this company and it's employees got stuck with this tool.

Thu, 02/28/2013 - 22:32 | 3288744 StychoKiller
StychoKiller's picture

If iPod wasn't a typo, then yeah, it's truly a bonehead ideer!

Thu, 02/28/2013 - 13:51 | 3286441 lynnybee
lynnybee's picture

hhaaa ha .  well, Ackman won't be getting any money out of this consumer .... there's nothing @ JCPENNEY, he should have known that no one shops there !

Thu, 02/28/2013 - 16:52 | 3287489 helping_friendl...
helping_friendly_book's picture

Ackman is, probably the biggest buyer of jcp cds as he shorts the fuck out of jcp. He has probably been loaning himself shares to short while he destroys the company. He is not a dummy.

I am sure everything is working out to his specifications.

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