Moody’s Investors Service said it revised J.C. Penney’s rating outlook to positive from stable. Moody’s also affirmed the company’s Caa1 corporate family rating, and raised the company’s speculative grade liquidity rating to SGL-1 from SGL-2.
“The rating outlook revision to positive from stable reflects Moody’s view that JC Penney’s operating performance has shown signs of improvement as a result of better merchandising, cost controls, and integration of its online business” said Moody’s vice president Scott Tuhy. He added, “We have seen positive momentum building for the company to achieve $700 to $800 million of adjusted EBITDA, a level in which earnings would fully cover cash flow and interest”. The upgrade in the Speculative Grade Liquidity rating primarily reflects the company’s improved operating performance as we expect free cash flow to be near break-even levels and the company’s meaningful cash balances are sufficient to cover expected seasonal working capital needs.
The following ratings were affirmed:
- $1.85 billion asset based revolving credit facility due June 2019 at B1 (LGD2)
- $500 million asset based “first in last out” term loan due June 2019 at B2 (LGD3)
- $2.2 billion term loan due 2018 at B2 (LGD3)
- Senior Unsecured Notes at Caa2 (LGD5)
- Medium Term Notes Program at (P)Caa2
- Senior Unsecured Shelf at (P)Caa2
To read Moody’s full outlook, click here.