Goldman Sachs lines up $1.75 billion J C Penney loan: source

Fri Apr 26, 2013 5:23pm EDT
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By Caleb Frazier and Alistair Barr

(Reuters) - Goldman Sachs has arranged a $1.75 billion financing package for J.C. Penney Co Inc (JCP.N: Quote), backed by the department store chain's real estate and other assets, a source familiar with the situation said on Friday.

Shares of the ailing retailer closed 11.5 percent higher at $17 on Friday, having touched their highest levels in nearly two months, after CNBC first reported the financing had been arranged.

Penney spokesman Joey Thomas said the company does not comment on speculation or rumor. Goldman did not respond to a request for comment.

The retailer has not yet agreed to a deal and there is no guarantee it will, said the source, who did not want to be identified because the information was not public.

Penney, which ended the last fiscal year with less than $1 billion in cash, has been exploring various options to shore up capital after a steep sales slump followed a botched turnaround attempt by former CEO Ron Johnson.

"The debt will buy them time and get them through Christmas. Then you take each day at a time and try to win back customers slowly," said David Berman of Durban Capital, a hedge fund firm focused on retail and e-commerce.

While a debt deal of this type "would allow them to live for this year," Berman said, "it's hard to know what they'll need."

Under Johnson, Penney tried to eliminate coupons and turned off its core shoppers, leading to a 25 percent decline in sales last year. He was recently replaced by his predecessor, Myron Ullman, who is expected to return to the chain's previous strategy of discount pricing.   Continued...

A man with a Macy's bag walks past the J.C. Penney's store in New York, April 11, 2013. REUTERS/Brendan McDermid