S&P Lifts J.C. Penney’s Outlook to ‘Positive’

Sensing that J.C. Penney Co. Inc.’s turnaround effort is gaining traction, Standard & Poor’s Ratings Services Thursday lifted the midtier department store retailer’s outlook to “positive” from “stable.” While S&P said that Plano, Tex.-based Penney’s ability to improve its metrics could lead to a capital structure that is “sustainable” and effect a “modest upgrade,” it reaffirmed all of its credit ratings, including the corporate credit rating of “CCC-plus,” which connotes that its debt is “currently vulnerable and dependent on favorable business, financial and economic conditions” to meet its financial commitments. The “CCC” family of ratings is four below investment grade. “We think there is a one-third chance that adjusted EBITDA will approach around $1 billion [in 2015], which is one indication that the company’s capital structure would be sustainable,” wrote S&P credit analyst Robert Schultz. He noted that comparable-store sales and EBITDA both moved into positive territory last year, with comps up 4.4 percent in both the fourth quarter and the full year and EBITDA reaching $323 million last year versus a $819 million EBITDA loss in 2013. Schultz said the argument for a rating upgrade would be supported if cash flow, exclusive of capital expenditures, were to reach $250 million or higher and EBITDA

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