J.C. Penney Draws $850 Million; Apollo’s Rexnord Cuts Loan Rate

J.C. Penney Co. (JCP) drew $850 million from its revolving credit line to improve liquidity after the first year in which the retailer’s operations consumed cash in decades. Rexnord LLC is seeking to reduce the rate on a $939 million term loan that comes due in April 2018

J.C. Penney’s drawdown on the $1.85 billion revolver will be used for capital spending and to replenish inventory as the company opens renovated home departments next month, the retailer said today in a statement. Rexnord, the Apollo Global Management LLC-owned industrial-components maker, is proposing to pay interest at 2.75 percentage points more than the London interbank offered rate, compared with 3.5 percentage points it currently pays, according to a person who asked not to be identified because the deal is private.

New Federal Deposit Insurance Corp. regulations, which took effect on April 1, requiring collateralized-loan obligations to be treated as “higher-risk” assets, will affect offerings, according to David Preston, a CLO analyst at Wells Fargo in Charlotte, North Carolina.

“March issuance was spurred on by the new FDIC assessment formula,” Preston wrote in a report today. “The primary market likely will pause over the next two months, as investors and managers digest the impact of the FDIC assessments.”

CLO issuance of $11.2 billion in March increased quarterly offerings to $27.4 billion. That compares with a total of $55.8 billion in 2012, according to the Wells Fargo report.

Dynegy Loan

Dynegy Inc. (DYN), the independent U.S. power producer that exited from bankruptcy protection last year, cut the rate on $1.8 billion in loans. An $800 million B-2 portion will pay interest at 3 percentage points more than Libor with a 1 percent minimum, compared with 3.75 percentage points and with a 1.25 percent floor initially offered.

The price of loans rose 0.03 cent to 98.48 cents on the dollar, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index. That’s the most since July 19, 2007. Last week, the average yield on the JPMorgan Leveraged Loan Index dropped to a new low of 5.68 percent.

Osmose Holdings Inc., the Oaktree Capital Management LP- owned provider of utility services and wood treatment chemicals, is seeking a $405 million loan to pay a dividend and lower borrowing costs, according to a person with knowledge of the matter.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net

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