J.C. Penney shares fall further as liquidity concerns grow
Sept 26 (Reuters) - J.C. Penney Co Inc shares fell more than 8 percent in premarket trading amid concerns the retailer may not be able to boost its cash reserves ahead of the crucial holiday season.
The struggling retailer is looking to raise up to $1 billion in new equity, Reuters reported on Wednesday.
"We still believe JCP has ample liquidity for 2013, but if cash burn is running worse than our estimates, the company may need to raise capital to cushion against a potentially challenging holiday season," Citigroup analyst Deborah Weinswig said in a note.
She reaffirmed her "sell" rating on the stock, cutting her price target to $7 from $11.
J.C. Penney shares, which have fallen about 49 percent this year, were trading at $9.38 before the bell on Thursday. They fell 15 percent on Wednesday after Goldman Sachs said it expects the retailer's sales to improve more slowly than expected.
Citigroup's Weinswig also said the turnaround was taking longer than hoped in a softening macroeconomic environment.
The cost for insurance against a J.C. Penney default has shot back to near record-high levels over the last week.
The company, which has a "CCC+" credit rating from Standard & Poor's, reflecting a substantial risk in owning its debt, has about $2.6 billion of outstanding bonds.
The company's benchmark 5-year credit default swap contract price surged by more than 13 percent on Wednesday, according to Markit data.
The cost to insure $10 million of J.C. Penney bonds against a default for five years now requires an upfront payment of about $2.2 million plus quarterly payments of about $300,000 for the duration of the contract. The contract's pricing reflects a default probability of nearly 65 percent.
(Reporting by Siddharth Cavale in Bangalore and Dan Burns in New York; Editing by Kirti Pandey)