JC Penney’s (NYSE:JCP) $350M Bond Offering


For the first time in about 4.5 years, J. C. Penney (NYSE:JCP) aims to examine the marketplace with high yields with its $350 million offer of non-callable five-year senior notes seeing it as a type of refinancing exercise lying on three near-term periods of maturity. The joint book-runners; Barclays (NYSE:BCS), Goldman Sachs (NYSE:GS) and J.P. Morgan (NYSE:JPM) have an investor call which was scheduled at 10:30 a.m. EDT on Tuesday, leaving pricing for the later part of the week.

Various bans are helping investors in expecting ratings of about CCC-/Caa2 as stated by sources. The 5.65% non-call notes of J.C. Penney (NYSE:JCP) are due 2020 and are pegged at a 92 context thus giving off about 7.375%, relating to sources. This is up by one point this month.

The proceeds of the deal that was registered by the SEC will aid in helping to finance the tender offer launched this morning on the three maturities: $200 million issuance of a 6.875% note(s) that will be due in 2015, $200 million issuance of a 7.65% note(s) which will be due in 2016, and $285 million issuance of 7.95% note(s) that will be due in 2017, as stated by the firm. The deal is to buy about $300 million at premium or market value; however make-whole premiums are not accepted. It will be interesting to see if that will have any impact at all.

Holders are being offered a $30/bond tender premium before 5:00 p.m. on the 22nd of September; the base premium that will be paid for the tendering is about $1,075, $1,067.5 and $1,037.5 per bond.

There was an increase of three points in 6.875% of notes to about 106/107 with the 7.65% of paper adding 4.5 points, to about 109.5/110.5; along with  the 7.95% of notes pushing up to about three points, making it to 108/110, as per reports through various sources.

As stated in the previous month, the variety of borrower bonds surged with the company reporting better than estimated results in the second quarter. 7.65% notes of the company increased three points making it to 105 context with 7.625% of bonds due to 2097 advancing to about 85.5/87.5, prior to a 82 context; the rest being pegged at about 85/87 the current week with last trading in small batches at about 86.24 of trade show data.

There was a decrease in half for credit protection along with five year of CDS decreasing by five points from 10.5 prior to the report. Five-year CDS this morning were about 14% tighter making it to around 3.3/4.3 points at large.

In the second quarter, J.C. Penney (NYSE:JCP) stated that the profit which was $2.8 billion increased to $2.66 billion the previous year. EBITDA was the one figure that blew out as the company reported an improvement of $342 million on a yearly basis making it to $90 million. There was a positive S&P Capital IQ result of EBITDA making it to $39 million compared to the consensus mean prediction of a negative of $57 million EBITDA.