UPDATE 1-Penney says CIT continues to fund vendors, has ample cash
(Adds more detail, updates share move)
Aug 1 (Reuters) - J.C. Penney Co Inc said on Thursday that commercial lender CIT Group Inc continued to support deliveries from suppliers, and claimed reports to the contrary were untrue.
The retailer added it has plenty of cash on hand and all major supplier were still shipping.
J.C. Penney shares rose 6.2 percent to $15.50 in premarket trading. The stock price fell 10 percent in late trading on Wednesday, after The New York Post reported CIT had cut off credit to smaller suppliers on concerns about J.C. Penney's sales performance this quarter.
A source told Reuters Wednesday that CIT had stopped funding some future shipments to J.C. Penney, and that the two parties were in talks to resolve the issue. The retailer did not return several requests for comment Wednesday afternoon.
"Jcpenney continues to have the support of all of its key vendors, who have maintained their shipments to the company," the company said in a statement on Thursday.
Finance companies such as CIT, known in the industry as factors, provide short-term loans to suppliers that wait to be paid. It is usually smaller vendors that use the services, since larger suppliers finance their own sales.
CIT, run by former Wall Street executive John Thain, temporarily halted loans to Sears Holdings Corp suppliers in January 2012 after the company posted dismal holiday results. It resumed funding a few months later after Sears provided assurances about its finances.
In the last fiscal year, J.C. Penney's sales dropped 25 percent after then-chief executive failed in a bid to reinvent the chain as an emporium offering fashionable but affordable goods.
J.C. Penney also said Thursday it expects to have $1.5 billion in cash on hand for the quarter just ending. It added that CIT provides factoring services for less than 4 percent of its merchandise inventory.
Penney will report results later this month. Wall Street analysts expect a 6.7 percent drop in sales at stores open at least a year.
(Reporting by Phil Wahba in New York and Siddharth Cavale in Bangalore; Editing by Joyjeet Das and Jeffrey Benkoe)