J.C. Penney paying off $500 million loan
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Upping a revolving line of credit is allowing J.C. Penney Co. Inc. (NYSE: JCP) to pay off a $500 million loan.
The company announced Monday that it received $500 million in incremental bank commitments, increasing its revolving line of credit under its senior secured asset-backed credit facility from $1.85 billion to $2.35 billion.
With that money, Plano-based Penney is prepaying a $500 million term loan that would have matured in June 2019. Both the credit increase and loan repayment are expected to close in December.
“We proactively pursued this transaction to reduce our long-term debt and ongoing interest expense and to further enhance our financial flexibility while maintaining our strong liquidity position as we continue to make progress on our goal of $1.2 billion in (earnings before interest, taxes, depreciation and amortization) by 2017,” J.C. Penney CEO Marvin Ellison said in a statement.
The $2.35 billion credit facility, which also matures in June 2019, will remain open and be used for seasonal working capital and general corporate purposes, the company said.
Paying off the loan is expected to reduce Penney’s interest expenses by $20 million annually beginning next year. In its third quarter 2015 earnings reported Friday, the company logged $102 million in net interest expense and nearly $5.15 billion in long-term debt.
Co-leading the credit facility increase were Wells Fargo & Co. (NYSE: WFC), J.P. Morgan Chase (NYSE: JPM), Barclays, Bank of America Merrill Lynch, Citizens Bank, Regions Bank and HSBC.