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Does JCP Need Another Loan?

Traditionally, the holidays are all about the joy of giving, but this year JC Penney’s (JCP) is in the receiving mood. Rumors have been swirling about the industry that the retail behemoth is in talks to raise more cash to finance its turnaround strategy.

JCP has already borrowed more than $3 billion this year, bedeviled by financial troubles. JCP reported a $586 million loss for the second quarter ending August 3, bringing its total losses to the year to a gargantuan $934 million. Sales in the second quarter dipped 11.9%, a yearly total of 14.2%.

Some say JCP is experiencing pressure from shareholders to take advantage of cheap financing before interest rates rise. The company insists it has no immediate needs for an infusion of new capital and expects to end the year with $1.5 billion in reserves.

Paul Swinand, analyst for Morningstar Inc., said “It suggests the third quarter isn’t going that great.”

Experts have conjectured that JCP could borrow against its considerable real estate holdings, valued at approximately $4.08 billion.

Almost immediately after taking over the helm from ousted Ron Johnson, new CEO Mike Ullman withdrew $850 million from JCP’s revolving $1.85 billion in available credit and orchestrated a $2.25 billion loan from Goldman Sachs.