Reports: J.C. Penney In Early Talks To Raise Additional Capital

(RTTNews) - Beleaguered department store chain J.C. Penney, Inc. (JCP) is 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, according to media reports on Sunday.

JCPenney is said to be advised by Goldman Sachs Group, Inc. (GS) for raising the cash. Meanwhile, it is unclear how much money the company is planning to raise.

The company is already in initial talks with institutional investors and banks and is reportedly evaluating various alternative for raising capital.

In May, JCPenney already entered into a new five-year $2.25 billion senior secured term loan credit facility, with the proceeds to be used to finance the cash tender offer for the notes and to fund ongoing working capital requirements and other general corporate purposes.

Goldman Sachs Bank USA was the lead arranger of the term loan credit facility. Barclays, J.P. Morgan Securities LLC, BofA Merrill Lynch and UBS Securities LLC were the other joint arrangers.

Plano, Texas-based JCPenney had in early April also drawn $850 million out of its committed revolving credit facility of $1.85 billion to fund its spending.

The current reported plan to raise capital comes close on the heals of two of JCPenney's largest stake holders exiting their respective stakes in the company.

New York-based real estate investment trust Vornado Realty Trust (VNO) exited its remaining stake in JCPenney on Friday, a week after its Chairman and CEO Steven Roth's resignation from JCP's board. Vornado had a 6.1 percent stake in JCPenney.

Vornado Realty sold all of its 13.4 million common shares beneficially owned by it in a block trade to Citigroup Global Markets, Inc., at a price of $13.00 per share.

The retailers largest shareholder, billionaire William Ackman's hedge-fund Pershing Square Capital Management, L.P., had in mid-August exited its entire 18 percent stake after failing in an attempt to install a new CEO at the retailer.

A month ago, JCPenney reported a wider-than-expected loss of $586 million or $2.66 per share for the second quarter, hurt by hefty charges. Net sales decreased 12 percent to $2.66 billion, but was a slower decline than the first quarters 16 percent. On a positive note, the retailer said the early weeks of the back-to-school shopping period were encouraging, and added that it plans to end the year with $1.5 billion in excess liquidity.

The company reported the worst net loss in more than a quarter-century last year, and has also not turned a quarterly profit since mid-2011.

JCP closed Friday's regular trading session at $12.96, down $0.18 or 1.37% on a volume of 42.83 million shares. The stock lost a further $0.31 or 2.39% in after-hours trading.