Tuesday 19 September 2017 by FIIG Research Trade opportunities

New DirectBond – JC Penney senior unsecured USD notes

Our latest DirectBond is a beloved middle class US retailer, JC Penney. It offers family apparel to home furnishings and new in-store cosmetics counters ‘Sephora’. As the slogan goes, “When it fits, you feel it”

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J.C. Penney Corporation, Inc. (JC Penney), founded in 1902, operates 1,011 department stores in 49 states and Puerto Rico, as of 29 July 2017. The business is one of the largest department store and e-commerce retailers in the United States that sells merchandise and services from approximately 2,300 domestic and foreign suppliers.

JC Penney stores often house several leased departments such as Sephora, Seattle’s Best Coffee, salons, optical centres, portrait studios, and jewellery repair. In March 2017, the company announced it would close 138 stores – 127 have closed as at 30 June 2017. The terminated stores represent about 14% of the company’s locations, but account for just 5% of its sales. Instead, as part of its continuing effort to advance sustainable growth and long term profitability, resources will be redirected to help expand its Sephora boutiques, one of the company’s top performing divisions.

Since the beginning of May, JC Penney has added 70 new concessions and completed 32 expansions to its best-in-class partnership with Sephora. The company is also growing its appliance showrooms and seeing positive sales momentum alongside the repositioning of its apparel business with most categories seeing positive comparables despite a difficult market. Recent business performance reported positive comparable store sales quarter to date with total net sales increasing 1.5% to USD3bn. 

This senior secured notes offering gives investors access to an established retailer. Semi-annual coupon payments are fixed at 5.875% and the final maturity of the notes is 1 July 2023.

On an indicative mid price of USD102.65, the yield to worst is 5.09% per annum.

The bond is only available to wholesale investors, with a minimum initial investment of USD10,000 and in multiples of USD1,000 thereafter. 

Want to try this on for size? Find more information on the JC Penney 2023 bond factsheet.External link - opens in a new window

Prices accurate as at 19 September 2017 but subject to change.