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.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 04/15/2013 - 09:02 | 3449457 fonzannoon
fonzannoon's picture

They should sell their gold.

Mon, 04/15/2013 - 09:06 | 3449473 insanelysane
insanelysane's picture

Summary: JCP circling the drain.

Mon, 04/15/2013 - 09:09 | 3449489 fonzannoon
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.

Mon, 04/15/2013 - 09:12 | 3449499 Rubicon
Rubicon's picture

Short shorts

Mon, 04/15/2013 - 09:22 | 3449551 ptoemmes
ptoemmes's picture

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

Mon, 04/15/2013 - 09:35 | 3449592 Son of Loki
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?



Mon, 04/15/2013 - 09:05 | 3449470 sudzee
sudzee's picture

Inventory will decline as suppliers refuse to supply.

Mon, 04/15/2013 - 09:08 | 3449479 MiltonFriedmans...
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....

Mon, 04/15/2013 - 09:07 | 3449481 Dr. Engali
Dr. Engali's picture

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

Mon, 04/15/2013 - 09:45 | 3449615 NoDebt
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.

Mon, 04/15/2013 - 09:07 | 3449485 rsnoble
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.

Mon, 04/15/2013 - 09:09 | 3449492 rsnoble
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.

Mon, 04/15/2013 - 09:09 | 3449495 Handful of Dust
Handful of Dust's picture

Empty this weekend. Grim.

Mon, 04/15/2013 - 09:12 | 3449500 dobermangang
dobermangang's picture

Death Spiral.

Mon, 04/15/2013 - 09:11 | 3449501 SyntheticFriday
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.

Mon, 04/15/2013 - 09:14 | 3449508 Sudden Debt
Sudden Debt's picture



Mon, 04/15/2013 - 09:30 | 3449572 camaro68ss
camaro68ss's picture

180 day and out receivables are assets as well right?

Mon, 04/15/2013 - 09:13 | 3449511 Downtoolong
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.

Mon, 04/15/2013 - 10:54 | 3450035 hannah
hannah's picture

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

Mon, 04/15/2013 - 09:15 | 3449513 scatterbrains
scatterbrains's picture

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

Mon, 04/15/2013 - 09:15 | 3449518 Anglo Hondo
Anglo Hondo's picture

Does JCP sell whisky to go with that revolver?

Perhaps they should.


Mon, 04/15/2013 - 09:20 | 3449543 d edwards
d edwards's picture

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

Mon, 04/15/2013 - 09:15 | 3449521 Seasmoke
Seasmoke's picture

Someone call Martha Stewart.

Mon, 04/15/2013 - 09:17 | 3449534 d edwards
d edwards's picture

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

Mon, 04/15/2013 - 09:20 | 3449547 robertocarlos
robertocarlos's picture

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

Mon, 04/15/2013 - 09:47 | 3449633 NoDebt
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.

Mon, 04/15/2013 - 09:16 | 3449529 Seasmoke
Seasmoke's picture

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

Mon, 04/15/2013 - 09:18 | 3449538 buzzsaw99
buzzsaw99's picture

visited a jcp sunday. it blows.

Mon, 04/15/2013 - 09:31 | 3449575 sunnyside
sunnyside's picture

Visited a JPM monday.  It sucks.

Mon, 04/15/2013 - 09:26 | 3449557 tnquake
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!

Mon, 04/15/2013 - 09:27 | 3449565 Handful of Dust
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.

Mon, 04/15/2013 - 11:43 | 3450371 kchrisc
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.


Mon, 04/15/2013 - 09:31 | 3449576 e-recep
e-recep's picture

one million dollar bills confiscated in turkey :

Mon, 04/15/2013 - 09:32 | 3449579 SheepDog-One
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!

Mon, 04/15/2013 - 09:37 | 3449582 foodstampbarry
foodstampbarry's picture

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

Mon, 04/15/2013 - 09:33 | 3449583 CaptainSpaulding
CaptainSpaulding's picture

Im an educated consumer. I go to Syms

Mon, 04/15/2013 - 09:35 | 3449588 robertocarlos
robertocarlos's picture

Somebody shipped their pants.

Mon, 04/15/2013 - 09:49 | 3449645 NoDebt
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.

Mon, 04/15/2013 - 09:36 | 3449593 ZeroPoint
ZeroPoint's picture

The age of consumerism is over.

Mon, 04/15/2013 - 09:39 | 3449596 Dr. Engali
Dr. Engali's picture

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

Mon, 04/15/2013 - 09:39 | 3449600 Burt Gummer
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 ________________

Mon, 04/15/2013 - 09:41 | 3449601 Marley
Marley's picture

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

Mon, 04/15/2013 - 10:00 | 3449702 q99x2
q99x2's picture

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

Mon, 04/15/2013 - 10:04 | 3449733 Dan Conway
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!

Mon, 04/15/2013 - 11:03 | 3450085 hannah
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.

Mon, 04/15/2013 - 11:59 | 3450437 GoldRetriever
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."






Mon, 04/15/2013 - 12:14 | 3450569 kchrisc
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

Mon, 04/15/2013 - 12:15 | 3450586 riskarb
riskarb's picture

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


Do NOT follow this link or you will be banned from the site!