JCPenney's Long Awaited Revolver Drawdown Arrives, Total Debt Rises To $3.8 Billion

Tyler Durden's picture

Just four days ago we noted the 'endgame' scenario that JCP appears to be heading in as they looked to raise new capital. It would appear things have escalated a little more quickly than hoped. Amid chatter of vendor concerns and what appears to be a slower process than they hoped for raising capital, the firm announced today, that "the Company has drawn $850 million out of its  $1.85 billion committed  revolving credit facility.  Proceeds will be  used to fund working capital  requirements and capital expenditures, including the  replenishment of inventory levels  in anticipation of the completion  of its newly  renovated home departments  next month." More worrisome is the fact that the firm managed to extract only $850 million on $2.3 billion in Inventory: while not completely worthless as we first suspected, it appears JPM is only willing to give JPM credit for about a third of its inventory at liquidation value. Remember that the revolver it is the cheapest financing JCP has in palce which raises the question - why not draw more?  Ask JPM.

This is being spun as positively as possible by the firm, but with CDS trading wide of 900bps and cash clearly burning faster than expected, things are not good at JCP (down 1.5% in the pre-market after being +3% earlier).

Finally, this means that JCP is now fresh out of encumerable "secured" assets and will be forced to raise capital via the equity route (unless someone has a real deathwish and wishes to buy unsecured HY debt, most likely issued by Jefferies) and given that Total Pro Forma debt rises to $3.8 billion on just about ($800MM) of EBITDA, this means that any additional capital raising will be through selling shares (to Bill Ackman only?) most likely somewhere in the single digits range.


Full Statement:

Company Draws On Credit Facility To Fund Ongoing Spending, Including Inventory and Renovations Ahead of New Home Launch


Working With Financial Advisors to Develop Strategic Financial Plan Going Forward


PLANO, Texas (April 15,  2013) - J. C.  Penney Company, Inc. (NYSE:JCP)  today announced plans to enhance the  Company's financial flexibility and  position.  As part of that process, and consistent with its previously stated plans, the Company has drawn $850  million out of its  $1.85 billion committed  revolving credit facility.  Proceeds will be  used to fund working capital  requirements and capital expenditures, including the  replenishment of inventory levels  in anticipation of the completion  of its newly  renovated home departments  next month. 


Chief Financial Officer Ken Hannah said, "Earlier this year, we increased  our revolving credit facility  in anticipation of  operating, working capital  and capital expenditure needs, especially during the first half of the year. As we near completion of the home department  transformation in over 500 stores,  we have been undertaking and will continue to experience a significant  inventory build and increase in capital expenditures."


Hannah continued, "The draw  under our revolver today  provides more than  our current funding needs  to ensure  our continued liquidity.  Moreover, we  will continue  to  explore  additional   capital  raising  alternatives  with   the assistance of our financial advisors."


Over the  past few  months,  the Company  has  worked to  improve  performance through changes  in  its pricing  and  promotional strategies,  including  the return of coupons, and the development of other new initiatives to drive store traffic and deliver the style, quality and value that its customers want.  The action today  bolsters  those  efforts,  as well  as  the  Company's  on-going financial position.

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fonzannoon's picture

They should sell their gold.

insanelysane's picture

Summary: JCP circling the drain.

fonzannoon's picture

yes and their share price is down less than 1%. For a company on the balls of their ass. Gold however is down 6% and silver closer to 10%...due to the obvious recovery.

ptoemmes's picture

Yeah - to pay for the golden parachutes for their crack C-Team.

Son of Loki's picture

Have you seen their jewelry counters, fonz? Almost empty...never seen anything like it in my lifetime....what are they going to sell? And how about all that money remodelling?



sudzee's picture

Inventory will decline as suppliers refuse to supply.

MiltonFriedmansNightmare's picture

Isn't JMP the lender of last resort?  Oh wait, that is the Fed, but then again, it's the same thing, no?  My head hurts....

Dr. Engali's picture

In other news Ackman was found dead from an overdose in his bathtub.

NoDebt's picture

And Icahn sent a Hallmark "condolances on your loss" card, but only to keep up appearances.  To gloat at this point would have been unseemly.

Ackman's other investments have done pretty good, actually, but everything he's spouted off about in the media he's taken a beating.  And that's what will be remembered.

rsnoble's picture

Nursing home patient.  Sucking the life and $ out of everyone for one last grasp of air.

I haven't heard of anyone shopping at a JCP for years.  Who gives a flying fuck it's an old dinosaur and thanks to them my poor parents could only afford to buy me 3-4 shirts every year in grade school. LOL.  Die already.

rsnoble's picture

Of course some of the upper mgt is still making some good $, they don't want to lose their job so they drag this POS along as long as they can.  Just like US politicians and the miserable US economy.

Handful of Dust's picture

Empty this weekend. Grim.

SyntheticFriday's picture

"it appears JPM is only willing to give JPM credit for about a third of its inventory at liquidation value."


While this does adhere to the JPM controls everything philosophy, I think one of those should read JCP.

Sudden Debt's picture



camaro68ss's picture

180 day and out receivables are assets as well right?

Downtoolong's picture

why not draw more?

Because, the Fed doesn’t want a line item for pillow cases, costume jewelry, and cardigan sweaters on its balance sheet. That’s almost as shitty as MBS.

hannah's picture

well the fed is in the toilet paper business so home goods is a step up.

scatterbrains's picture

Bullish for commercial property reits as JCP will have to clear out their shit and make room for more Cash4Gold outlets.

Anglo Hondo's picture

Does JCP sell whisky to go with that revolver?

Perhaps they should.


d edwards's picture

There was a time-early 1900's say, that you could buy a revolver from JCP catalog.

Seasmoke's picture

Someone call Martha Stewart.

d edwards's picture

AAAAAAY! You said REVOLVER. Are you advoctating GUN VIOLENCE? (sarc)

robertocarlos's picture

Have you seen the plastic crap she's flogging? She should be in jail.

NoDebt's picture

She was.  She didn't like it, so she redecorated the place.  I bet they were never so glad to get rid of an inmate as they were to have her out.

Seasmoke's picture

They should just close all their fucking doors and open an account on eBay.

buzzsaw99's picture

visited a jcp sunday. it blows.

sunnyside's picture

Visited a JPM monday.  It sucks.

tnquake's picture

Tough to compete against Wally World on selling cheap Chinese sh*t, Bangladesh clothes, etc...

Maybe they need to hire Jenna Jameson as the new spokesperson, at least it will create some buzz!

Handful of Dust's picture

March 7th, 2013

JCPenney’s toxic workplace culture exterminates and color codes employees


Ron Johnson became JCPenney CEO on Nov. 2011. Since then, he has purged all of the former executives and 1900 corporate HQ employees at Plano, Texas. The company has also cut 19,000 store employees. In his first year, store sales fell 23%. Penney stock shares fell 62% over the past year. So much for his ambitious turnaround plan.

HQ employees loathe and fear him. Now he launches a new plan to eliminate store workers by color code.


My guess is few employees will miss the guy.

kchrisc's picture

Color-Codes Macht Frei!

As in, what a sadistic employee management technique--Just fire or layoff those you need to and be done with it instead of tormenting them with this  Red/Yellow/Green shit.


e-recep's picture

one million dollar bills confiscated in turkey :

SheepDog-One's picture

No problem, JCP! Just take out a loan from Bank of America at like the rest of the public has to!

foodstampbarry's picture

Maybe Ellen DeGeneres wasn't a good spokesperson after all. Good job pissing off 50% of your customer base - Liberal idiots.

CaptainSpaulding's picture

Im an educated consumer. I go to Syms

robertocarlos's picture

Somebody shipped their pants.

NoDebt's picture

That ad was hysterical.  I saw it over the weekend.  Too bad it was KMart (or some other brick-and-mortar retailer I couldn't give a ship about).

I think I might just go ship my pants right now.  For sure, gold is shipping the bed this morning.  Etc, etc.

ZeroPoint's picture

The age of consumerism is over.

Dr. Engali's picture

Kohl's is eating their lunch. The stores are packed and they are developing a loyal customer base.

Burt Gummer's picture

It's time for another round of, FILL IN THE BLANKS!


JC Penny is _____________ and as for a trade recommendation you should ________________

Marley's picture

Just $10 more and I'll be back into the Silver Games!

q99x2's picture

Not even accepting bitcoin would have helped their sales. JC Penny sucks.

Dan Conway's picture

It is not good when a company needs to borrow at the low point in their working capital cycle.  Without a cash infusion or significant change in costs this company will be bankrupt in 2014 after next year's holiday season.  Bye-bye JCP!

hannah's picture

JCP headquarters is FILLED TO THE MAX with idiots. they could lose half of management and it wouldnt hurt. the problem is that when these companies layoff, all the smart workers are canned and the affirmative actions keep their jobs and the company is then filled with retards.

GoldRetriever's picture

One of the conditions of the revolving credit facility with JPM is that JCP must install the "Dimon Collection" in each men's department.

The fabric for the spring/summer line is a new material called "SearedSucker." Details of the pants/shorts include deep pockets and gold plated zippers. An embroidered whale adorns the back patch pocket. Sportcoats have multiple hidden pockets.

If the company makes it to the fall season, plans are in the works for an all fleece "Dimon Collection."






kchrisc's picture

This is not a comment on JCP per se--don't know much about it--but a commentary on the sad frog-boil condition of the American people.

I don't think that it is so old-fashion to have prices on things that are the price and not some gamed starting point for "sales," "discounts," and "special days."

Before my family and I expated ourselves last year--exit stage left--we bought some jeans and things at JCP and liked that the price was the price and not some gimmick that was going to see us paying inflated prices this week in lieu of next week's "sale" prices.

With that said, the American people's rejection of "Everyday Low Prices" is more a commentary on their condition than JCP's. They have been so conditioned to be manipulated that they would rather hang-on to the rigged game--Khol's, etc.--than pay a fair price. And they know it is a rigged game. Sad,, just sad.

I am NOT saying that JCP would, could or should have been saved--don't know--but that the American people are just about cooked. It isn't hot water anymore but cooking broth.          hujel

riskarb's picture

"Hello, this is Peggy at JPM Prime Credit.... You have point to redeem?"