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Merrill Of America Cuts JCP Price Target To $13 On Pending Revolver Draw
When we reported on JCPenney's horrendous quarterly results, we made the comments that when "speaking of [the] credit facility, JCP had no borrowings under its 2012 Revolver, and about $1.3 billion available net of L/Cs. Expect these numbers to change." The reason we pointed this out, is that the second a retailer goes from "unused Revolver" to "used Revolver", the bankruptcy deathwatch drums begin their steady beat. Indeed, it was only a matter of time before even the traditionally slow sellside brigade figured out that JCP's liquidity is horrifying and about to get much worse, and moments ago Bank of America downgraded JCP by $3 to a $13 price target on expectations of an imminent revolver draw. To wit: "JCPenney intends to self-fund its transformation, but we think it will
need to draw down on the revolver as early as this quarter." This explains why Ackman is down another $60 million in the name at last check.
From Bank of America's Lorraine Huttchinson
Important shareholder begins liquidating stake; lowering PO
Vornado sells; lowering PO to reflect pressure on stock
Last night, the WSJ reported that Vornado (VNO), JCPenney’s third largest shareholder, is liquidating 10mn shares of JCPenney (54% of its 18.5mn share stake). Vornado’s CEO resigned last week and JCPenney was discussed on Vornado’s earnings call as being on Vornado’s “for-sale” list. Vornado was not willing to discuss a time frame for exiting its investment due to a conflict of interest (Steven Roth is on JCPenney’s board). We think Vornado could be back in the market in the near term to sell its remaining 8.6mn shares. Our work indicates that monetizing JCPenney’s real estate would be difficult and substantially less lucrative than the market initially thought.
We are lowering our PO by $3 to $13 as we think the stock will remain under pressure due to deteriorating investor confidence in JCPenney’s turnaround, and we reiterate our Underperform rating.
Time to put the real estate thesis to bed
In our recent department store real estate note, we evaluated the likelihood of JCPenney splitting itself into two publicly traded companies -- a standalone REIT and an operating company. We concluded that JCPenney’s retail fundamentals are not sound enough to support a stand alone operating company and we do not think REIT investors have an appetite for owning single tenant mall anchor real estate. Vornado’s liquidation of its JCPenney stake supports our view that this was simply a non-core investment, without strategic purposes.
Expect revolver draw in 2013, but ample liquidity for now
JCPenney's balance sheet looks OK today but deteriorating fundamentals should cause pressure in 2013. The company has access to $3.1bn of liquidity including $0.85bn of cash (excluding deferred vendor payments made in 1Q), $1.85bn of revolver capacity, and a $0.4bn accordion on the revolver. JCPenney intends to self-fund its transformation, but we think it will need to draw down on the revolver as early as this quarter
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Selling actual "revolvers" would probably be the only move for JCP to make a profit
True. Certainly wouldn't hurt.
JCP is a joke and so is $13.
If Merrill is telling people to sell, they most likely have a buyer to take those shares at a discount.
JCP will pull through. An army of negative net worth subprime new car "buyers" are about to descend on their store parking lots in shiny new cars and save the day with their credit cards.
Car Buyers Taking Out Bigger Loans, Set New RecordKind of get the impression that nobody at JCP has a clue what to do
Here's all you need to know: They wanted people to do Yoga in their stores. Freakin Yoga! Their CEO is clueless.
http://www.bizjournals.com/dallas/blog/2012/08/is-jc-penney-your-new-yog...
Ron Johnson could put a revolver to his head and say: "Buy something, or this guy gets it!"
Nazi company Bayer responds to India: "we don't care if all of you die, we want our money"
http://www.thelocal.de/money/20130305-48327.html
Time for Indians to boycott all german imports.
I'm amazed Bayer is aware of anything happening outside of a sales meeting.
Then again they use Siebel internally so go figure.
I'm sure the indians will be able to figure it out on their own....1.2B people ought to be able to come up with a few of their own ideas without stealing everything.
Just before Montgomery Wards went out of business, it's commercial slogan (no I'm not kidding) was "Whatever it takes, Montgomery Ward!". Needless to say it didn't work.
Maybe JCP should just go with, "For the love of God, BUY SOMETHING!" or "Come on. You can't try on pants on Amazon"...
Good luck JCP.
Butt where is the gay mafia?
Unpossible! What did BofAMRL not understand about "All-Time High" and "Everything's Fixed"?
Good article. I used to like walking thru JCP and browsing ... but now it stinks...sorry to say.
Also sorry to say their new CEO may be a tad overpaid being handed over millions in salary and bonuses. Rewarding failure provides a wonderful Role Model to kids.
I blame Icahn. He's more Jewish than Jesus.
You must be a foreigner. The correct phrase is "I blame Bush."
Fax a copy over to the criminal printing dwarf chief cunt nation wrecker.
I am more than sure the evil little bastard can help out here. He may criminally raise the price with open ended bollocks to £20 a share by day end.
Its gonna be a sweet day when he and his rubber faced, looks like a bulldog licking piss off a nettle friend hang for their crimes.
A sweet day indeed you two maniacs. I bet they both scream for their mothers, the fucking cunts.
Harvard MBA for the lower to middle class market. (Check)
Educating the masses about pricing. (Check)
Implementing marketing and advertising without prior testing. (Check)
Fire anyone with retail experience (well, almost everyone) and employ friends and sycophants. (Check)
Wearing Nordstrom clothing to speak to employees or Wall Street. (Check)
Terminate call centers, catalogue and disable a computer system that previously worked. (Check)
Multiple quarters of huge losses and profit margins shrinking. (Check)
Eliminate commission and as many as possible "on floor" salespeople earning barely earning minimum wage or slightly better. (Check)
Employing a no question return policy that the masses really appreciated.--an unmitigated disaster.
By God, I think he's earned that $54 million while learning retail!
If it worked for AAPL, it will work for JCP.
Haven't been to JCP for a couple of years. When I was there it was empty. It's a dead company.
Bubble Bernanke and the Fed printed up plenty fiat so banks are flush with Benny dollars. Bnaks could finance a buyout.
The company has been ruined by the latest CEO. He killed it.
JCP should close up and trade stocks and currencies. Everyone else is doing it. Why do real work anymore of have a business. DO like Wall Street. Create Algos that trade back and forth.
JCP needs a Ruger boutique, a Glock boutique, a Smith & Wesson boutique, an ammo boutique... and they might do OK. They used to sell guns.
Bummer. I really like JCP's cotton t-shirts & semi casual dress pants.
America's mall will become... sooner rather than later, a playground for geriatric calisthenic 'jay-walkers' financed by a shrinking/ morphing social security check fully dependent upon the sales of 'depends and early-bird bistro menu`ettes-- those most favorably for 'stimulating the evacuation of the bowels', labelled such as dollartreefibreappetizers... whereas the corner stores will be refurbished into handicap letrines-- whence only a sinkhole can save the 'CMBS's'!
Amazon Neo-Signs flashing a virtual atrophic and metamorphosis subliminal message... a,'hurry-up-and-die', euthanasia within and throughout?
Johnson really is a retard if jcp hasn't borrowed every nickle they can by now. Eat, drink, and draw down existing credit lines, for tomorrow we...