JC Penney ups credit facility to $1.85 billion

NEW YORK (AP) - J.C. Penney Co. has amended its bank credit facility to increase its borrowing capacity as it looks to finance its multiyear transformation.

The department store chain said Tuesday it expanded the credit facility to $1.85 billion and got an option to increase that by another $400 million.

Penney's previous facility had $1.75 billion of borrowing capacity, according to Deborah Weinswig of Citi Investment Research.

The Plano, Texas, retailer said that the increase enhances its liquidity and provides it with additional financial flexibility to support its transformation.

The move comes as the struggling department store chain marks the one-year anniversary of a radical plan to get rid of most sales in favor of every day prices. The strategy is part of an overall plan spearheaded by CEO Ron Johnson to transform every part of the business from the brands it carries to the store experience.

But the overhaul has been more challenging than expected. Penney is expected to report later this month its fourth consecutive quarter of big sales drops and net losses since it implemented its new pricing strategy. The worry is that Penney won't be able to stem the bleeding of sales in time to finance the transformation of the stores. Late last year, it started rolling out shops within its stores and plans to carve up its stores into 100 specialty shops by late 2015.

"As we enter the second year of our transformation, today's announcement reflects the confidence of our banking group in our long-term strategy and further strengthens our liquidity position as we continue to execute our plan," said Ken Hannah, Penney's chief financial officer, in a statement.

J.P. Morgan Securities LLC, Bank of America Merrill Lynch, Barclays Capital and Wells Fargo Capital Finance arranged the financing transaction.

Investors have sent shares of Penney down more than 55 percent from a peak of $43 in the days after the plan was rolled out in February 2012. Penney's shares rose 14 cents in after-hours trading on Tuesday, after slipping 26 cents to close at $19.27 in regular trading.

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