J.C. Penney’s Ullman Using Loan, Price Hike in Turnaround
J.C. Penney Co. (JCP) Chief Executive Officer Myron Ullman received a $1.75 billion loan commitment from Goldman Sachs Group Inc. and has been raising some prices as he works to stanch the retailers cash drain.
The five-year term loan will be secured by real estate and an interest in other assets of the retailer, Plano, Texas-based J.C. Penney said today in a statement. The proceeds will be used for working capital and to discharge the companys 7.125 percent notes due in 2023.
Ullman has focused on shoring up the companys finances since replacing Johnson three weeks ago and started by drawing $850 million from its credit line on April 15. Hes also reversing Johnsons avoidance of promotions and is raising some prices more than 50 percent while dropping some back down later to give the appearance of a discount, according to a study today from JPMorgan Chase & Co.
The loan takes liquidity concerns off the table for at least two or three years, Alex Fuhrman, an analyst for Piper Jaffray Cos. in New York, wrote in a note today. While the prospects of a default before the companys next debt payment in 2015 are now remote, the loan wont mitigate the cash consumption Piper Jaffray expects to reach $1 billion in the first quarter, Fuhrman said.
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http://www.bloomberg.com/news/2013-04-29/j-c-penney-gets-1-75-billion-goldman-loan-commitment.html