JCP » Topics » Credit Ratings

These excerpts taken from the JCP 10-K filed Mar 31, 2009.

Credit Ratings

Our credit ratings and outlook as of March 26, 2009 were as follows:

 

     Long-Term
Debt
     Outlook

Moody’s Investors Service, Inc.

   Baa3      On Review

Standard & Poor’s Ratings Services

   BBB-      Negative

Fitch Ratings

   BBB-      Stable

Rating agencies consider the following factors in their rating decisions: changes in operating performance, comparable store sales, the economic environment, conditions in the retail industry, financial leverage and changes in our business strategy.

In February 2009, Standard and Poor’s Rating Services and Moody’s Investors Service, Inc. have both placed the Company on review for possible downgrade citing the unlikelihood that we could avoid sustained declines in comparable store sales.

During 2008, we maintained our investment-grade credit rating. In February 2009, Fitch Ratings downgraded our long-term debt rating to BBB- from BBB, citing expectations for continued weakness in comparable store sales through 2009. Fitch Ratings reaffirmed our stable rating outlook. In November 2008, Standard and Poor’s Ratings Services affirmed our long-term debt rating at BBB- and

 

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revised its outlook for the Company from stable to negative. The outlook revision reflected the challenging operating environment, which resulted in the acceleration of comparable store sales declines. In February 2008, Moody’s Investors Service, Inc. affirmed the Company’s long-term credit rating at Baa3 and revised its rating outlook to stable from positive, citing recent negative comparable store sales and uncertain overall economic outlook.

Despite the economic conditions that have impacted our operating performance, we continue to focus on restoring our competitive investment-grade credit ratings.

Credit Ratings

STYLE="margin-top:0px;margin-bottom:0px">Our credit ratings and outlook as of March 26, 2009 were as follows:

 


































   Long-Term
Debt
    Outlook

Moody’s Investors Service, Inc.

  Baa3    On Review

Standard & Poor’s Ratings Services

  BBB-    Negative

Fitch Ratings

  BBB-    Stable

Rating agencies consider the following factors in their rating decisions: changes in operating performance,
comparable store sales, the economic environment, conditions in the retail industry, financial leverage and changes in our business strategy.

In February
2009, Standard and Poor’s Rating Services and Moody’s Investors Service, Inc. have both placed the Company on review for possible downgrade citing the unlikelihood that we could avoid sustained declines in comparable store sales.

During 2008, we maintained our investment-grade credit rating. In February 2009, Fitch Ratings downgraded our long-term debt rating to BBB- from BBB,
citing expectations for continued weakness in comparable store sales through 2009. Fitch Ratings reaffirmed our stable rating outlook. In November 2008, Standard and Poor’s Ratings Services affirmed our long-term debt rating at BBB- and

 


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revised its outlook for the Company from stable to negative. The outlook revision reflected the challenging operating environment, which resulted in the
acceleration of comparable store sales declines. In February 2008, Moody’s Investors Service, Inc. affirmed the Company’s long-term credit rating at Baa3 and revised its rating outlook to stable from positive, citing recent negative
comparable store sales and uncertain overall economic outlook.

Despite the economic conditions that have impacted our operating performance, we continue
to focus on restoring our competitive investment-grade credit ratings.

These excerpts taken from the JCP 10-K filed Apr 1, 2008.

Credit Ratings

Improvements in the Company’s operating performance and financial metrics led to its long-term debt credit rating being raised to investment grade level by Fitch in 2005 and by Moody’s and Standard & Poor’s in early 2006. Restoring competitive investment grade credit ratings, consistent with retail industry leaders, continues to be a financial goal for the Company.

As of March 17, 2008, the Company’s credit ratings and outlook were as follows:

 

     Long-Term
Debt
     Outlook

Moody’s Investors Service, Inc.

   Baa3      Stable

Standard & Poor’s Ratings Services

   BBB-      Stable

Fitch Ratings

   BBB      Stable

The Company maintained its investment grade credit ratings during 2007. In November 2007, Fitch Ratings and Standard & Poor’s Ratings Services affirmed the Company’s long-term debt ratings at BBB and BBB-, respectively. Both agencies revised their rating outlooks to stable from positive reflecting their opinions that the retail environment will continue to be challenging through 2008 and the expectation that the Company’s credit and operating metrics improvement will accordingly take longer than previously anticipated. In February 2008, Moody’s affirmed the Company’s long-term credit rating at Baa3 and changed their rating outlook to stable from positive, citing recent negative comparable store sales and an uncertain overall economic outlook. Going forward, the Company expects that the rating agencies will continue to focus on operating performance consistency, earnings growth and financial leverage as key factors in any ratings decisions.

Credit
Ratings

Improvements in the Company’s operating performance and financial metrics led to its long-term debt credit rating being raised to
investment grade level by Fitch in 2005 and by Moody’s and Standard & Poor’s in early 2006. Restoring competitive investment grade credit ratings, consistent with retail industry leaders, continues to be a financial goal for the
Company.

As of March 17, 2008, the Company’s credit ratings and outlook were as follows:

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 


































   Long-Term
Debt
    Outlook

Moody’s Investors Service, Inc.

  Baa3    Stable

Standard & Poor’s Ratings Services

  BBB-    Stable

Fitch Ratings

  BBB    Stable

The Company maintained its investment grade credit ratings during 2007. In November 2007, Fitch Ratings and
Standard & Poor’s Ratings Services affirmed the Company’s long-term debt ratings at BBB and BBB-, respectively. Both agencies revised their rating outlooks to stable from positive reflecting their opinions that the retail
environment will continue to be challenging through 2008 and the expectation that the Company’s credit and operating metrics improvement will accordingly take longer than previously anticipated. In February 2008, Moody’s affirmed the
Company’s long-term credit rating at Baa3 and changed their rating outlook to stable from positive, citing recent negative comparable store sales and an uncertain overall economic outlook. Going forward, the Company expects that the rating
agencies will continue to focus on operating performance consistency, earnings growth and financial leverage as key factors in any ratings decisions.

SIZE="2">Off-Balance Sheet Arrangements

Management considers all on- and off-balance sheet debt in evaluating the Company’s overall liquidity
position and capital structure. Other than operating leases, which are included in the Contractual Obligations and Commitments table on page 28, the Company does not have any off-balance sheet financing. See detailed disclosure regarding operating
leases and their off-balance sheet present value in Note 15.

 


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As of February 2, 2008, the Company had guarantees of approximately $6 million for certain personal property leases
assumed by the purchasers of Eckerd, which were previously reported as operating leases. Currently, management does not believe that any potential financial exposure related to these guarantees would have a material impact on the Company’s
financial position or results of operations. JCP, through JCP Realty, Inc., a wholly owned subsidiary, has investments in 14 partnerships that own regional mall properties, six as general partner and eight as limited partner. JCP’s potential
exposure to risk is greater in partnerships in which it is a general partner. Mortgages on the six general partnerships total approximately $348 million; however, the estimated market value of the underlying properties is approximately $881 million.
These mortgages are non-recourse to JCP, so any financial exposure is minimal. In addition, JCP Realty, Inc. has guaranteed loans totaling approximately $3 million related to an investment in a real estate investment trust. The estimated market
value of the underlying properties significantly exceeds the outstanding mortgage loans, and the loan guarantee to market value ratio is 3.3% as of February 2, 2008. In the event of possible default, the creditors would recover first from the
proceeds of the sale of the properties, next from the general partner, then from other guarantors before JCP’s guarantee would be invoked. As a result, management does not believe that any potential financial exposure related to this guarantee
would have a material impact on the Company’s financial position or results of operations.

As part of the 2001 sale of the assets of the
Company’s Direct Marketing Services subsidiary, JCP signed a guarantee agreement with a maximum exposure of $20 million. Any potential claims or losses are first recovered from established reserves, then from the purchaser and finally from any
state insurance guarantee fund before JCP’s guarantee would be invoked. As a result, management does not believe that any potential exposure would have a material effect on the Company’s consolidated financial statements.

STYLE="margin-top:12px;margin-bottom:0px">The Company does not have any additional arrangements or relationships with entities that are not consolidated into the financial statements.

STYLE="margin-top:18px;margin-bottom:0px">Common Stock Repurchases

During the 2004 to 2007 period, the Company
purchased a combined $5.3 billion of its common stock through open-market transactions as follows:

 


































































(in millions)  Shares    Cost(1)SIZE="2">

2004

  50.1    $1,951

2005

  44.2     2,199

2006

  11.3     750

2007

  5.1     400
         

Total

  110.7    $5,300
         

(1) Excludes commissions.

FACE="Times New Roman" SIZE="2">Of the total repurchases, the Company’s Board authorized $3.0 billion in 2004, $1.15 billion in 2005, $750 million in 2006 and $400 million in 2007. In order to fund these programs, the Company used a portion of
the $3.5 billion in net cash proceeds from the sale of the Eckerd drugstore operations, $260 million in net cash proceeds from the sale of Renner stock, cash proceeds and tax benefits from the exercise of employee stock options and existing cash and
short-term investment balances.

 


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This excerpt taken from the JCP 10-K filed Apr 4, 2007.
Credit Ratings
Improvements in the Company’s operating performance and financial metrics led to its long-term debt credit rating being raised to investment grade level by Fitch in 2005 and by Moody’s and Standard & Poor’s in early 2006. Restoring competitive investment grade credit ratings, consistent with retail industry leaders, continues to be a financial goal for the Company.
 
As of March 19, 2007, the Company’s credit ratings and outlook were as follows:
 
                 
    Long-Term
   
    Debt   Outlook
 
Moody’s Investors Service, Inc. 
  Baa3   Positive
Standard & Poor’s Ratings Services
  BBB-   Stable
Fitch Ratings
  BBB   Stable
 
During the first quarter of 2006, both Moody’s and Standard & Poor’s raised the Company’s credit ratings to investment grade. In February 2006, Moody’s raised its senior unsecured credit rating for the Company from Ba1 to an investment grade rating of Baa3. In April 2006, Standard & Poor’s raised its credit rating on the Company’s long-term corporate credit and senior unsecured debt from BB+ to an investment grade rating of BBB-. In October 2006, Fitch raised its credit rating on the Company’s senior unsecured notes and debentures and its $1.2 billion 2005 Credit Agreement from BBB- to BBB, both investment grade credit ratings. In December 2006, Moody’s raised its outlook on the Company’s long-term debt rating from “Stable” to “Positive.” Going forward, the Company expects that the rating agencies will continue to focus on operating performance consistency, earnings growth and financial leverage as key factors in any ratings decisions.
 
This excerpt taken from the JCP 10-K filed Apr 6, 2006.

Credit Ratings

Improvements in the Company’s operating performance and financial metrics led to its long-term debt credit rating being raised to investment grade level by Fitch Ratings in 2005 and by Moody’s Investors Service, Inc. in early 2006. Restoring competitive investment grade credit ratings, consistent with retail industry leaders, continues to be a financial goal for the Company.

As of March 20, 2006, the Company’s credit ratings and outlook were as follows:

 

    

Corporate

Family

Rating

  

Long-Term

Debt

  

Outlook

Moody’s Investors Service, Inc.

   Baa3    Baa3    Stable

Standard & Poor’s Ratings Services

   BB+    BB+    Positive

Fitch Ratings

   N/A    BBB-    Stable

During February 2006, Moody’s raised its senior unsecured credit rating for the Company from Ba1 to a Baa3 investment grade rating, citing the Company’s continued strong liquidity, healthy free cash flow generation, solid leverage and coverage metrics and management’s balanced approach to financial

 

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Index to Financial Statements

policy. In addition, Moody’s raised its corporate family debt rating (previously named the senior implied rating) from Ba1 to Baa3, revised its outlook for the Company to “Stable” and withdrew its speculative grade liquidity rating of SGL-1. During 2005, Standard & Poor’s raised its credit rating outlook from “Stable” to “Positive.” Also during 2005, Fitch raised its credit rating on the Company’s senior unsecured notes and debentures and its $1.2 billion revolving credit facility from BB+ to a BBB- investment grade rating and revised its outlook for the Company to “Stable.” On February 17, 2006, Standard & Poor’s placed the Company on a “credit watch” with positive rating implications. Going forward, the Company expects that the rating agencies will continue to focus on operating performance consistency, earnings growth and financial leverage as key factors in any ratings decisions.

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