J.C. Penney Co., the retailer that’s working to rebound from its worst sales year, will offer fewer safeguards to lenders on its $1.75 billion financing.
The five-year covenant-light deal, which is being arranged by Goldman Sachs Group Inc., won’t include financial maintenance requirements that typically prevent borrowers from loading up on debt, according to a regulatory filing today.
The debt will have a 1 percent minimum on the London interbank offered rate, according to the filing. Lenders are offered call-protection of 102 cents in the first year and 101 cents in the second year, meaning the company would have to pay premiums of two cents and one cent to repay the debt during that period.
Proceeds will be used to fund working capital requirements and “to amend, acquire or satisfy and discharge” the 7.125 percent notes due in November 2023, Plano, Texas-based J.C. Penney said today in a statement.
J.C. Penney drew $850 million from its $1.85 billion revolving line of credit facility earlier this month, according to an April 15 statement.
In a revolving line of credit, money may be borrowed again once it’s repaid; in a term loan it can’t.