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JCPenney Gains on Goldman Sachs Debt Financing

Stocks in this article: JCP GS

NEW YORK ( TheStreet) - JCPenney (JCP) shares climbed Monday after the Plano, Texas-based department store said it had obtained debt financing from Goldman Sachs (GS).

Shares were rising 2.2% to $17.37.

Goldman Sachs agreed to provide a 5-year $1.75 billion senior secured term loan facility. Under the terms, the proceeds of the loan facility may be used to fund ongoing working capital requirements and other general corporate purposes as well as pay off or retire outstanding debt that's due in 2023.

"This loan facility is an important component of our strategic plan to strengthen the Company's financial position," JCP CFO Ken Hannah said in a statement. "Together with our revolving credit facility, this will give us the financial strength we need to meet our current funding requirements and build toward a successful future."

The debt facility will be secured by real estate and "an interest in substantially all other assets of the company and certain of its subsidiaries," it said. JCPenney's real estate includes 429 of its 1,100 stores, according to Reuters .

The company said on April 15 that it had drawn down $850 million on its $1.85 billion revolving credit facility for operating, working capital and capital expenditure needs.

Last Thursday, billionaire investor George Soros revealed that his firm Soros Fund Management owns a 7.9% stake in the struggling retailer.

Soros seems to be either placing a long-term bet on JCP's turnaround after the company reinstated Myron "Mike" Ullman as CEO replacing Ron Johnson or he could be looking to make a profit -- at the expense of retail investors, according to TheStreet's Rocco Pendola.

The New York Post is also reporting that two unnamed hedge fund managers have started amassing shares of JCP, citing an anonymous source.

One fund, said to be worth more than $10 billion, scooped up shares between 5%-10% of the retailer. The stake is likely to be passive, the Post says.

A second hedge fund has also begun buying shares of late, the article says.

Pershing Square's Bill Ackman is JCPenney's largest shareholder.

Retail stocks were mixed following the opening bell on Monday.

-- Written by Laurie Kulikowski in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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