Shares were falling 11.7% to $10.50 with more than 55 million shares changing hands in mid-Wednesday trading.
In a note released late Tuesday, Goldman Sachs (GS) credit analysts Kristen McDuffy and Ryan Gallant initiated coverage with an "underperform" rating on the company's 7.95% unsecured bonds that are due in 2017, its 5.65% notes due in 2020 and its 6.375% notes due in 2036.
"We recommend that investors buy 5-year CDS and also recommend a steepener, whereby investors sell 1-year CDS and by 5-year CDS," the September 24 note said. "Additionally, although we are comfortable with the collateral value at the top part of the structure, in our view, the company's term loan could experience downside if the company were to tap the debt markets for incremental liquidity. ... As a result we are waiting for a better entry point on the term loan."
J.C. Penney's credit default swaps, essentially an insurance policy protecting investors against the riskiness of a company's credit profile, were soaring to almost 1,100 basis points, according to Bloomberg.
The company couldn't be immediately reached for comment regarding a potential offering.
The Plano, Texas-based retailer, struggling to jumpstart a turnaround under the direction of CEO Mike Ullman, is said to be in discussions with hedge funds and other investors under the advisement of Goldman about additional fundraising options. Included in the range of possibilities is the company borrowing against its real estate holdings, Bloomberg said Friday.