J.C. Penney Commences Share Offering - Update

(RTTNews) - J.C. Penney Co. Inc. (JCP) said Thursday it has commenced an underwritten public offering of 84 million shares of its common stock.

The struggling department store chain said it plans to use the net proceeds from the offering for general corporate purposes.

J.C. Penney also plans to grant the underwriters a 30-day option to purchase up to an additional 12.6 million shares of common stock.

Goldman, Sachs & Co. is serving as the sole book-running manager for the offering.

J.C. Penney is expected to raise about $1 billion from the offering, based on J.C. Penney stock's closing price of $10.42 on Thursday.

On Wednesday, J.C. Penney's stock tanked 15 percent after a report by Goldman Sachs suggested that the company's liquidity levels will likely be strained in the third quarter and initiated coverage of its stock with an underperform rating.

That was followed by J.C. Penney CEO Myron Ullman who said that the company need not raise cash this year. But later, J.C. Penney stated it would raise funds from an offering managed by Goldman.

J.C. Penney said it is making progress to revive itself. The company said it remains encouraged by the growth in purchase conversion both in store and on jcp.com. It added that the overall sales on jcp.com continue to trend double digits ahead of the prior year.

Plano, Texas-based J.C. Penney's shares have fallen about 50 percent so far in 2013. The company now has a market capitalization of just $2.23 billion, the lowest for a company in the S&P 500 Index.

Media reports last week indicated that J.C. Penney was looking to raise additional funds, primarily by pledging real estate holding, to fund a turnaround after two of its largest stake holders exited their stakes recently.

In August, J.C. Penney reported a wider-than-expected quarterly loss of $586 million or $2.66 per share, hurt by hefty charges and lower sales. Net sales decreased 12 percent to $2.66 billion.

On a positive note, the retailer noted that the early weeks of the back-to-school shopping period were encouraging, and that it plans to end the year with $1.5 billion in excess liquidity.

The company's stock closed Thursday at $10.42, up $0.30 or 2.96%, on a volume of 122 million shares. In after hours, the stock dropped $0.54 or 5.18% at $9.88. The shares trade in a 52-week range of $9.52 - $27.00.