Penney to raise up to $932 million in share sale, lowers cash forecast

Fri Sep 27, 2013 5:20pm EDT
 
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By Phil Wahba and Olivia Oran

(Reuters) - J.C. Penney Co Inc (JCP.N: Quote) on Friday cut its forecast of year-end cash reserves as it expects to raise up to $932 million in a share sale, suggesting that the retailer is burning through cash faster than expected.

The retailer, whose shares have tumbled in the last year as it struggled to improve sales, said it would have about $1.3 billion in cash by the end of the year. In August, it had forecast $1.5 billion.

"While an equity raise improves (near-term) liquidity, we remain concerned that JCP will continue to burn cash in '14 and beyond," UBS analyst Michael Binetti, who has a "sell" rating on the stock, wrote in a note.

Penney said shares had priced at $9.65 each. Penney offered 84 million shares, which will severely dilute current shareholders.

The stock fell 11 percent to $9.30 in afternoon trading. The share sale would increase Penney's shares outstanding by 38 percent, excluding the 12.6 million additional shares the underwriters have the option to buy.

UBS' Binetti said the pre-holiday capital-raising, along with cautious comments from Penney's mall peers, increased concerns that near-term trends were not improving as anticipated.

So far some financing companies, known as factors, are not changing terms on the loans they provide Penney suppliers.

Michael Stanley, the managing director at Rosenthal $ Rosenthal, a large factor, said his firm has kept approving orders to Penney.   Continued...

 
Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid