Fitch Ratings downgraded J.C. Penney Co. Inc.’s debt rating two notches to “CCC” from “B-minus.”
This story first appeared in the October 3, 2013 issue of WWD. Subscribe Today.
A “CCC” rating under Fitch’s scale means that “default is a real possibility.”
Fitch said the downgrade reflected “higher-than-expected cash burn in 2013” as well as concerns that the company will need to raise additional funds next year.
The debt watchdog now expects Penney’s will burn through $2.8 billion to $3 billion in cash this year — $1 billion more than projected in mid-May.
Penney’s comparable-store sales have been weaker than Fitch expected and the company has been spending this year to launch its new home department and bring back basics and private-label brands.
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Fitch said “the risk for further inventory markdown remains through the holiday season as inventory buys remain aggressive and sales could continue to disappoint.”
Last week, the company surprised at least some investors with a plan to raise more than $800 million by selling at least 84 million shares. That came on top of a $2.25 billion term loan secured in May.