Mid-turnaround, J.C. Penney boosts borrowing capacity
(Reuters) - J.C. Penney Co Inc (JCP.N) has increased its borrowing capacity under a bank credit facility to $1.85 billion and expanded the accordion feature of the facility to $400 million, giving the retailer more flexibility as it works on a turnaround.
"As we enter the second year of our transformation, today's announcement reflects the confidence of our banking group in our long-term strategy and further strengthens our liquidity position as we continue to execute our plan," J.C. Penny Chief Financial Officer Ken Hannah said in a statement on Tuesday.
The moves increased the borrowing capacity on the department store operator's credit agreement to $2.25 billion from $1.75 billion, BMO Capital Markets analyst Wayne Hood said in a client note.
There were no changes in credit terms or covenants, Hood said.
"The credit risk profile of (J.C. Penney) continues to escalate as the company potentially increases leverage to bring about a so far disappointing transformation strategy," he added.
The company could not be immediately reached for comment.
The arrangement of the credit facility was co-led by J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Barclays Capital and Wells Fargo Capital Finance, J.C. Penny said.
Chief Executive Ron Johnson said last week the company would return to growth in 2013, despite severe sales declines in fiscal 2012.
Penney, which operates 1,100 department stores, began a turnaround a year ago that called for the elimination of most coupons and sales events. Long-term customers, trained for years to seek out discounts, balked at the new pricing strategy and reeled in purchases.