Despite Tapping Facility, JCPenney (JCP) Will Still Need to Raise More Cash
Bloomberg noted Tuesday that JCPenney might be looking for ways to borrow against its real estate holdings a raise further cash. One option the company might explore is spinning-off certain real estate into a new subsidiary that could issue debt, which could avoid triggering issues that might be present under current bond covenants.
Another option being considered is sale-and-leaseback on its property, while collateralization of assets might also be considered.
Blackstone Group is said to have been tapped as advisor for JCPenney on how to raise over $1 billion in cash, said Bloomberg, citing sources on the matter.
The draw down on the revolver was about four-times as large as many expected, but analysts believe that if the cost of borrowing isn't excessive, it would be a near-term positive.
Cash generation has been an issue for JCPenney recently, particularly since Ron Johnson became CEO in late 2011. During the company's latest fiscal year, the retailer ate up about $10 million in cash, versus generation of $820 million in cash flow the prior year.
Shares are flat in early trading Tuesday.