Citi Comments On JC Penney After Entering Into New Credit Facility

JC Penney JCP announced that it has entered into a new $1.25B credit facility, replacing its $750M facility that matured in April 2012. The company had previously announced its intention to renew this facility ahead of maturity. The new facility increases the company's borrowing capacity commensurate with its expected inventory and working capital needs, and it contains covenants that are in-line with its previous credit agreement. Citi views the new facility as an indication of the improved health of JCP's business. The arrangement of the facility was co-led by JP Morgan, Bank of America Merrill Lynch, Barclays Capital, and Wells Fargo Bank. Effective immediately, the facility may be used for general corporate purposes and will mature in April 2016. Pursuant to this refinancing, JCP expects to incur approx. $9 million in related fees and expenses in 1Q11. These costs are consistent with the company's previous guidance for approx. (-$0.02) per share of increased interest expense from the early renewal of its credit facility and are included in the company's $0.18 to $0.23 1Q11 EPS guidance. Citi has a $50 PT and Buy rating on JC Penney JCP closed Monday at $38.44