J.C. Penney scores $1.75 billion loan from Goldman SachsApril 29, 2013: 12:25 PM ET
Wall Street has been taking a second look at J.C. Penney in the weeks since controversial CEO Ron Johnson stepped down.
J.C. Penney said Monday that it secured a $1.75 billion loan from Goldman Sachs (GS). The announcement confirms reports late last week that that the retailer was nearing a financing deal with Goldman.
Investors were also encouraged Monday by a report in the New York Post that two major hedge funds had invested in J.C. Penney.
The loan from Goldman comes weeks after J.C. Penney announced that Johnson was stepping down as chief executive after just a year and a half.
Johnson, a former Apple (AAPL) executive, had embarked on an ambitious turnaround plan for J.C. Penney by transforming the department store chain into a collection of boutiques. He ditched older brands and announced plans to eliminate checkout counters in favor of mobile and self-checkout.
The results were dismal. J.C. Penney has been suffering steep losses, bleeding $427 million in the fourth quarter as sales fell 28% versus a year prior.
Johnson was replaced by his predecessor, Mike Ullman, who ran J.C. Penney for seven years prior to Johnson's arrival.
The loan from Goldman is an important part of the company's plan to strengthen its financial position, said J.C. Penney CFO Ken Hannah.
"This will give us the financial strength we need to meet our current funding requirements and build toward a successful future," Hannah said in a statement.
The five-year loan agreement with Goldman is in addition to the $850 million that J.C. Penney drew from its own $1.85 billion revolving credit facility earlier this month.
J.C. Penney said the money will be used as to meet ongoing capital needs and pay down debt.
Despite the recent rally, shares of J.C. Penney remain down 12% so far this year.
On StockTwits, some investors voiced concern about the company's long-term strategy as consumers continue to favor online retailers.
$JCP is on its way but how far can she run with those little legs and at what rpm?AnalystWire
Imperial Capital Starts J. C. Penney ($JCP) at Underperform; 'Dead Money'http://stks.co/tAG5
Others were more optimistic, calling for further gains in J.C. Penney stock.
Meanwhile, the leadership change at J.C. Penney raises questions about the investment strategy of Bill Ackman, the hedge fund manager who had backed Johnson's turnaround plan.
You know what they say. Timing is everything.