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Wells Fargo Securities, Others Commit to $2.35B ABL Facility for J.C. Penney

May 20, 2014, 07:36 AM
Filed Under: Retail

On May 14, 2014, J. C. Penney Corporation, Inc., a wholly-owned subsidiary of J. C. Penney Company, Inc. entered into a commitment letter, with Wells Fargo Securities, LLC, Wells Fargo Bank, National Association, Bank of America, N.A., Merrill Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities LLC, JPMorgan Chase Bank, N.A., Barclays Bank PLC and Goldman Sachs Bank USA (collectively, the "Commitment Parties"), under which the Commitment Parties have committed, subject to the terms and conditions set forth in the Commitment Letter, to provide the Corporation with a $2.35 billion senior secured asset-based revolving credit and term loan facility (the "Credit Facility").

The Credit Facility will replace the Amended and Restated Credit Agreement, dated as of January 27, 2012 (as amended and restated as of February 8, 2013, as amended on May 20, 2013, and as otherwise modified prior to the date hereof, the "Existing Credit Facility"). As with the Existing Credit Facility, borrowing availability under the Credit Facility will vary according to the Loan Parties' (as defined below) levels of inventory, credit card receivables and accounts receivable. The Credit Facility is expected to mature five years from the closing date thereof.

All borrowings under the Credit Facility will accrue interest at a rate equal to, at the Corporation's option, a base rate or an adjusted LIBOR rate plus a spread. The proceeds of the Credit Facility will be used (a) to repay or refinance all or a portion of the outstanding borrowings under the Existing Credit Facility, (b) to pay costs, expenses and fees in connection with the Credit Facility and other related transactions, and (c) for working capital and general corporate purposes. As of the date hereof, the Company has outstanding loans in the amount of $650 million under the Existing Credit Facility.

As with the Existing Credit Facility, the Credit Facility will be guaranteed by the Company, the Corporation, J. C. Penney Purchasing Corporation and certain of the Corporation's subsidiaries (collectively, the "Loan Parties"). The Credit Facility will be secured by collateral substantially similar to the Existing Credit Facility (the "ABL Priority Collateral"). Any proceeds of the ABL Priority Collateral will be applied first to the satisfaction of all obligations under the revolving facility and second to the satisfaction of the obligations under the term loan facility.

The commitment by the Commitment Parties to provide the Credit Facility is subject to, among other things, execution of a definitive loan agreement and other loan documentation and the satisfaction of other customary conditions precedent for financings of this type. Under the Commitment Letter, the Corporation undertakes to indemnify the Commitment Parties against certain liabilities and to reimburse the Commitment Parties for certain fees and expenses.

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