Boston, MA 02/25/2013 (wallstreetpr) – J.C. Penney Company, Inc (NYSE:JCP), the retailer has been reeling under losses of the last five consecutive quarters and William Ackman, hedge fund manger finally heaved a sigh of relief as he got lender clearance to the tune of billions of dollars, if necessary to clear its mounting debts and liabilities. J.C. Penney Company, Inc (NYSE:JCP) can now go-ahead with selling its preferred convertible stock without the risk of triggering payment provisions as per the Feb 12th regulatory filing. It now also has provisions to acquire upto $1.75 billion in new loans against asset and real estate collateral.
Revamping plans will need cash inputs
A prominent New York analyst cited that since J.C. Penney Company, Inc (NYSE:JCP)’s revival strategy was relying heavily on a 3-year plan of complete store revamping, it would definitely be in need of hard cash to tide over the current crises that it is facing. The Original credit accord that J.C. Penney Company, Inc (NYSE:JCP) had entered into in Jan 2012 was an asset-based loan that was limited to $1.5 billion and it was only in Jan 2013 that the credit line was upped to $1.75 billion by the retailer. JPMorgan Chase & Co (NYSE:JPM) and Bank of America Corp (NYSE:BAC) are a part of the bank syndicate that will be lending J .C. Penney Company, Inc (NYSE:JCP) money under the credit line.
Market researchers have noted that the company is doing much more than the announced addition of $100 million. J.C. Penney Company, Inc (NYSE:JCP) was one of the worst performers in the last year as it lost close to half its stock value. Its equivalents and cash levels fell drastically from $888million to $525 million within the third quarter. At that point, the company CFO Ken Hannah had announced that the fiscal year would see J.C. Penney Company, Inc (NYSE:JCP) ending up with $1 billion in cash but analysts are predicting it to be in the range of not more than $70 million.
No negative impact on stockholder interests
The U.S Securities and Exchange Commission passed the amended borrowing agreement that will now permit J.C Penney to raise money against a financial institution underwritten-stock sale. The control provisions on the credit line will remain untouched and in the event that J.C. Penney Company, Inc (NYSE:JCP) is acquired, the lenders can still force the repayment of outstanding borrowings if any. Existing shareholders can also purchase additional equity via the “rights offering”
A feud of sorts
Close to 50% of J.C. Penney Company, Inc (NYSE:JCP) shares are held by bondholders who are represented by the law firm Brown Rudnick LLP. They have put forth a claim on collaterals such as debentures that the company holds, on behalf of their clients in addition to the ones on warehouses and other inventory.
There are rumors about the billionaire investor Icahn Feud playing behind the bondholder scenes as a hit-back for the ongoing tussle against Ackman’s Pershing Square hedge fund. They both are rival bidders for Herbalife Ltd (NYSE:HLF). The co-incidence between the Icahn and Ackman clash and the bondholders dissent was too glaring to ignore especially since no disagreements has been forthcoming about the credit agreement which had otherwise been in place for over a year now. There have been open and on-air disputes between these two market players which will probably change the way the game is being played. However, J.C. Penney Company, Inc (NYSE:JCP) has made it very clear that they are neither intimidated nor afraid of any bondholder claims.
Shares of J.C. Penney Company, Inc (NYSE:JCP) went up by 4.27% to close at $22.47
Shares of JPMorgan Chase & Co (NYSE:JPM) went up by 1.37% to close at $48.91
Shares of Bank of America Corp (NYSE:BAC) went up by 0.18% to close at $11.44
Shares of Herbalife Ltd (NYSE:HLF) went down by 2.65% to close at $36.79