J.C. Penney Bonds Climb After Announcing $932 Million Stock Sale

J.C. Penney Co.’s bonds climbed and credit-default swaps tied to its debt tightened after the department-store chain announced a share offering to raise as much as $932 million.

The retailer’s $200 million of 6.875 percent bonds due October 2015, its nearest maturity, increased 2.1 cents to 93.25 cents on the dollar to yield 10.65 percent as of 9:57 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Credit swaps protecting against losses on the debt, which typically fall as confidence improves, declined 1.8 percentage points to 19.5 percent upfront as of 10:30 a.m., according to data provider CMA, which is owned by McGraw-Hill Financial Inc. and compiles prices quoted by dealers in the privately negotiated market.

Less than a day after the company said it was “pleased” with its turnaround efforts, Plano, Texas-based J.C. Penney said it would sell 84 million shares at $9.65 each, 7.4 percent below yesterday’s close.

The stock plunged this week after a Goldman Sachs Group Inc. debt analyst said the company’s cash will be strained this quarter, and fell 9.4 percent today to $9.45. The offering is “another bandaid” for the retailer, according to debt-research firm CreditSights Inc.

‘Clear Positive’

“The liquidity boost supports our view that the company will have sufficient funds to pay off its 2015 bonds at maturity,” James Goldstein, a New York-based credit analyst at CreditSights, said in a note published yesterday. “The extra equity injection is a clear positive for liquidity for J.C. Penney, but it is by no means a guarantee that the company’s glidepath towards a full scale turnaround will be free from major turbulence.”

The retailer said today it will end the fiscal year with about $1.3 billion in liquidity, excluding the offer proceeds. On Aug. 20, it predicted more than $1.5 billion, a forecast that didn’t assume it would need any additional outside financing.

The company’s $400 million of 5.65 percent notes due 2020 climbed 2 cents to 77 cents to yield 10.54 percent as of 10:54 a.m., Trace data show.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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