After JC Penney (JCP) CEO Mike Ullman vehemently denied that the ailing retailer had any plans to seek additional liquidity, the company moved to raise $1 billion in stock, apparently prepared to sell as much as 96.6 million shares in a public offering underwritten by Goldman Sachs.
JCP’s creditors remain concerned about its increasingly uncertain future. While many suppliers have reported seeing improvements in JCP’s outlook, others are proceeding more cautiously until more evidence of their financial health surfaces. Some companies that finance JCP’s product deliveries are raising the prices they charge , hedging against the potential fallout of a sharp decline in the future. Rosenthal & Rosenthal, one of these financiers, raised the price it charges JCP’s suppliers from 1% to 2%, and now will only finance 70% to 80% of all deliveries.
International markets have already been disrupted by swirling rumors that JCP was poised to seek additional financing. Earlier this year, Goldman Sachs orchestrated a $2.25 billion loan, with a considerable amount of real estate as collateral. Following the announcement of the new loan, JCP shares dropped 4.5% to $9.95 in after-hours trading.
Some say JCP’s investors have been pressuring it to take the loan now before interest rates rise. Others are worried that a disappointing holiday sales season might make the loan necessary, and that it was better not to procrastinate.
Some industry experts warn that even a positive performance during the holiday sales season would be a minor boon to the the company given its currently beleaguered position.
Paul Lejuez, analyst at Wells Fargo, said, “We don’t think it’s an achievement the market should be too excited about on top of a 32% decline in the fourth quarter of last year. “