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

Your rating: None

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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

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