Moody's Sees No Impact on JCPenney (JCP) Rating from $500M Term Loan Increase
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Moody's Investor's Service today stated that J.C. Penney Company, Inc.'s (NYSE: JCP) Caa1 Corporate Family Rating and negative outlook are not currently impacted by the increase to $2.25 billion from its previously announced $1.75 billion senior secured term loan due 2020. In addition, the increase will not change the B2 rating on the $2.25 billion term loan, the Caa2 senior unsecured notes rating, nor the SGL-3 Speculative Grade Liquidity rating.
The larger size of the term loan will further bolster JCP's liquidity. Thus, it provides JCP with additional financial flexibility to address its operating performance weakness. However, the ratings are not currently impacted as JCP's credit metrics and operating performance remain very fragile. Although first quarter operating results largely met Moody's expectations, operating performance was very weak. In addition, Moody's forecasts that JCP will continue to experience a sizable cash flow burn in the second and third quarters of 2013. JCP generated about $960 million in negative cash flow in the first quarter. Moody's estimates that JCP will likely burn an additional $1.4 billion of cash flow in the second and third quarters of 2013 before turning free cash flow positive in the fourth quarter.
The larger size of the term loan will further bolster JCP's liquidity. Thus, it provides JCP with additional financial flexibility to address its operating performance weakness. However, the ratings are not currently impacted as JCP's credit metrics and operating performance remain very fragile. Although first quarter operating results largely met Moody's expectations, operating performance was very weak. In addition, Moody's forecasts that JCP will continue to experience a sizable cash flow burn in the second and third quarters of 2013. JCP generated about $960 million in negative cash flow in the first quarter. Moody's estimates that JCP will likely burn an additional $1.4 billion of cash flow in the second and third quarters of 2013 before turning free cash flow positive in the fourth quarter.
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