Fitch: JC Penney Draw on Revolver Seen as Stop-Gap Measure
Fitch Ratings said in a press release that J.C. Penney drew down $850 million from its $1.85 billion revolving credit facility. The press release called this as a stop-gap measure before permanent financing is put in place. Fitch believes J.C. Penney will need to tap into additional funding to cover a projected free cash-flow (FCF) shortfall of $1.3 billion to $1.5 billion in 2013, which could begin to strain its existing sources of liquidity.
Upside or downside to Fitch’s FCF estimate will depend on the speed and effectiveness of critical decisions over the next weeks around pricing strategy, merchandising decisions (what new shops to build out and what to forego) and capital expenditures.
Fitch downgraded the Issuer Default Ratings (IDRs) on J.C. Penney and J.C. Penney Corporation, Inc. to ‘B-‘ from ‘B’ on February 28 and the Rating Outlook is Negative.
Its primary concern remains with the company’s ability to secure the $1 billion or so needed in permanent financing in 2013 to fund operations and peak seasonal working capital needs.
To read the entire Fitch news release, click here.
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