 Public Lender Presentation
May 14, 2013
.
By accepting this Lender Presentation, the recipient agrees to use any information contained herein in
accordance with its compliance policies, contractual obligations, applicable law, including
federal, state and foreign securities laws, the provisions of Section I of the Notice to and Undertaking by Recipients that has been posted to the Intralinks site
established in connection with the financing transactions described herein, and any applicable
confidentiality agreement by which such recipient is bound.
Exhibit 99.1 |
 Safe
Harbor Statement -
1 -
This presentation may contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward looking statements, which reflect the
Company’s current views of future events and financial performance, involve known and unknown
risks and uncertainties that may cause the Company’s actual results to be materially
different from planned or expected results. Those risks and uncertainties include, but are
not limited to, the success of our transformation, the impact of changes designed to transform
our business, competition and promotional activities, changes in merchandise styles and trends,
changes in store traffic trends, maintaining an appropriate mix and level of inventory, the
implementation of our new store layout, the availability of internal and external sources of
liquidity, our failure to attract, retain, and motivate our employees, the reduction and
restructuring of our workforce, the impact of cost reduction initiatives, a systems failure
and/or security breach that results in the theft, transfer, or unauthorized disclosure of
customer, employee, or Company information, disruptions in our information technology systems or
website, changes in our credit ratings, our failure to source and deliver merchandise in a timely
and cost-effective manner, changes in our arrangements with our suppliers and vendors,
restrictions under our revolving credit facility, potential asset impairment charges, risks
associated with importing merchandise from foreign countries, economic and political conditions
that impact consumer confidence and spending, the impact of holiday spending patterns and weather
conditions, changes in federal, state, or local laws and regulations, legal and regulatory
proceedings, significant changes in discount rates, actual investment return on pension assets
and other factors related to our qualified pension plan, the influence of our largest
stockholders, the volatility of our stock price and our ability to use net operating loss carryforwards
to offset future taxable income for U.S. federal income tax purposes. Please refer to the
Company’s most recent 10-K and subsequent filings for a further discussion of risks and
uncertainties. We do not undertake to update these forward-looking statements as of any
future date. This information may not be republished or otherwise distributed without the prior
written consent of J.C. Penney Company, Inc. |
 Special Notice Regarding Public Information
-
2 -
The Company has represented that the information contained in this lender presentation is either
publicly available or does not constitute material non-public information concerning the Company,
its subsidiaries, affiliates or its or their respective securities (“MNPI”). The
recipient of this lender presentation has stated that it does not wish to receive MNPI and
acknowledges that pursuant to confidentiality agreements, other lenders have received a lender
presentation that contains additional information concerning the Company, its subsidiaries,
affiliates or its or their respective securities that may be MNPI. Neither the Company nor
the arranger takes any responsibility for the recipient's decision to limit the scope of the
information it has obtained in connection with its evaluation of the Company and the facility.
Notwithstanding the recipient's desire to abstain from receiving MNPI and the Company’s
representation that there is no such MNPI in this lender presentation, the recipient acknowledges
that (1) pursuant to confidentiality agreements, certain of the individuals listed as contacts in this
lender presentation may be in receipt of MNPI or otherwise have access to information that is
provided to lenders or potential lenders who desire to receive MNPI and that if the recipient
chooses to communicate with any such individuals the recipient assumes the risk of receiving
MNPI, (2) information obtained as a result of becoming a lender may include such MNPI, and (3) it
has developed compliance procedures regarding the use of MNPI and that it will handle such MNPI
in accordance with applicable law, including federal and state securities laws. |
 Concerning the Arrangers
-
3 -
Each of Goldman Sachs Bank USA ("Goldman Sachs"), Barclays Bank PLC, J.P. Morgan Securities LLC,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and UBS Securities LLC (collectively, the
"Arrangers"), together with its affiliates, is a full service financial institution
engaged in various activities, which may include loan and securities trading, commercial
and investment banking, financial advisory, investment management, investment research, principal
investment, hedging, financing and brokerage activities. Each Arranger and/or one of its
affiliates may have, from time to time, performed, and may in the future perform, various financial
advisory and investment banking services for the Company and/or its affiliates. In the ordinary course of its
various business activities, each Arranger and/or its affiliates may make or hold a broad array
of investments and actively trade debt and equity securities (or related derivative securities) and
financial instruments (including bank loans) for their own account and for the accounts of their
customers, and such investment and securities activities may involve assets, securities and/or
instruments of the Company and/or its affiliates. Each Arranger and/or its affiliates may also
make investment recommendations and/or publish or express independent research views in respect
of such securities or instruments and may at any time hold, or recommend to clients that they
acquire, long and/or short positions in such securities and instruments. The proceeds of the
Facility may be used, in part, to repay existing debt of the Company, including existing debt
owed to one or more of the Arrangers and/or one or more of their respective affiliates.
Each Arranger and/or one or more of its affiliates may provide loans under the Facility for their own
accounts and such loans may comprise, individually or in the aggregate, a substantial portion of
the Facility. Certain of such affiliates may commit, subject to certain terms and
conditions, to provide such loans prior to commencement of the syndication of the Facility, at a
price and on terms agreed between such affiliates and the Company. In connection with the Facility,
the Company will pay certain fees, including commitment fees, to the Arrangers, as well as fees
or discounts payable or given to each Arranger and/or certain of its affiliates in consideration
for their respective commitments to provide loans, which commitments were made to the Company in
advance of the commencement of the general syndication of the Facility. |
 Management Presenters
Myron E. (Mike) Ullman, III
Chief Executive Officer
Ken Hannah
Chief Financial Officer
Michael D. Porter
Treasurer
Kristin Hays
SVP Investor Relations and Communications
-
4 - |
 Agenda
I.
Transaction Overview
II.
Company Overview
III.
Key Investment Highlights
IV.
Financial Overview
V.
Syndication Overview
VI.
Conclusion / Q&A
-
5 - |
 I. Transaction Overview |
 Executive Summary
J.C. Penney Company, Inc. (the “Company”) is a leading department store
retailer that conducts
business
through
its
1,104
stores
1
in
49
states
and
Puerto
Rico,
and
its
website, jcp.com
Fiscal year 2012 total net sales of $13 billion
Company leadership is focused on stabilizing the business and developing strategies
and initiatives that will best position J.C. Penney for the future:
Strengthening financial position, prudently managing expenses and capital
expenditures Rebuilding customer excitement and loyalty with marketing and
promotions designed to reconnect with our core customers
Driving customer traffic and conversion through occasions and compelling
assortment of national and private brands
The
Company
is
raising
a
$1,750
million
Senior
Secured
Term
Loan
Facility
to
fund
ongoing
working
capital
requirements
and
other
general
corporate
purposes,
and
to
amend, acquire or satisfy and discharge the Company’s outstanding 7.125%
Debentures due 2023
Guaranteed by all material subsidiaries of J.C. Penney and secured by
substantially all tangible and intangible assets of the Company, including
real estate collateral Secured by $4.2 billion of hard collateral (2.4x
coverage) and will be structurally senior to $2.6 billion of unsecured debt
and $3.9 billion of equity value² -
7 -
1
Reflects store count as of the most recent 10-K. Current store count is
1,102 stores as two leased stores have closed since February 2, 2013. 2
Assumes satisfaction and discharge of $254 million of 7.125% debentures due 2023
and market capitalization as of May 10, 2013. |
 -
8 -
Sources & Uses | Pro Forma Capitalization
($ in millions)
Includes premium associated with satisfaction and discharge of $254 million 7.125%
debentures due 2023. $1,750 million Senior Secured Term Loan
Sources
Amount
% Total
Uses
Amount
% Total
Senior Secured Term Loan
$
1,750
100.0
%
Cash to Balance Sheet
$
1,301
74
%
Address 2023 Debentures
254
15
%
Fees and OID
1
194
11
%
Total Sources
$
1,750
100.0
%
Total Uses
$
1,750
100.0
%
Pro Forma Capitalization
Debt Capitalization
Rate
Maturity
Q1 2013
PF
Cash and Cash Equivalents
$
821
$
1,301
$
2,122
ABL Revolver ($1.85 billion)
P + 200
Apr-16
850
850
New Secured Term Loan
TBD
May-18
-
1,750
1,750
Capital Leases
100
100
Total Secured Debt
$
950
$
2,700
6.875% Medium-Term Notes due 2015
6.88
%
Oct-15
200
200
7.650% Debentures due 2016
7.65
%
Aug-16
200
200
7.950% Debentures due 2017
7.95
%
Apr-17
285
285
5.750% Senior Notes due 2018
5.75
%
Feb-18
300
300
5.650% Senior Notes due 2020
5.65
%
Jun-20
400
400
7.125% Debentures due 2023
7.13
%
Nov-23
254
(254)
-
6.900% Notes due 2026
6.90
%
Aug-26
2
2
6.375% Senior Notes due 2036
6.38
%
Oct-36
400
400
7.400% Debentures due 2037
7.40
%
Apr-37
326
326
7.625% Notes due 2097
7.63
%
Mar-97
500
500
Total Debt
$
3,818
$
5,313
Market Capitalization as of May 10, 2013
3,894
$
3,894
Total Capitalization
$
7,712
$
9,207
1 |
 -
9 -
J.C. Penney Pro Forma Organizational Chart
J.C. Penney Company, Inc.
(Holdings)
Term Loan Guarantor
ABL Guarantor
JCP
Real Estate
Holdings, Inc.
Term Loan Guarantor
ABL Guarantor
J.C. Penney
Purchasing
Corporation
Term Loan Guarantor
ABL Guarantor
Immaterial
Subsidiaries
New $1.75 billion Senior
Secured Term Loan
Guarantee for New $1.75
billion Term Loan and
$1.85 billion ABL
Guarantees and Stock
Pledges for New $1.75 billion
Senior Secured Term Loan
Extant $2.61 billion Bonds
Extant $1.85 billion ABL
J.C. Penney
Properties, Inc.
Term Loan Guarantor
ABL Guarantor
J.C. Penney Corporation, Inc.
(OpCo)
Term Loan Borrower
ABL Borrower
Note: Assumes $254 million 7.125% debentures due 2023 are satisfied and
discharged. |
 -
10 -
Real Estate Collateral Overview
JCP Real Estate
Holdings, Inc.
Term Loan Guarantor
ABL Guarantor
Extant $1.85 billion
ABL and $2.61
billion Bonds
New $1.75 billion
Senior Secured
Term Loan
Guarantees and Stock
Pledges for New $1.75 billion
Senior Secured Term Loan
J.C. Penney Properties, Inc.
Term Loan Guarantor
ABL Guarantor
J.C. Penney Corporation, Inc.
(OpCo)
Term Loan Borrower
ABL Borrower
Bond Issuer
Stores
at
J.C.
Penney
Corporation,
Inc.
Ownership
Count
Appraised
Value
Owned
72
$708
Ground-Leased
31
266
Total
103
$974
Stores
at
J.C.
Penney
Properties,
Inc
Ownership
Count
Appraised
Value
Owned
234
$1,929
Ground-Leased
89
395
Total
323
$2,324
Note:
Chart
above
demonstrates
entities
with
material
properties
and
excludes
other
material
and
immaterial
subs.
Includes
de
minimis
properties
with
fair
market
values
below $2 million. Excludes 3 properties in JCP Puerto Rico. Pro forma
for satisfaction and discharge of $254 million 7.125% debentures due 2023. The number of perfected
mortgages and the corresponding appraised value is subject to change based on
continuing diligence and title review of real estate portfolio. Store and
distribution center count as of the most recent 10-K; 1,102 stores currently open as two leased stores have closed since February 2, 2013.
Appraised values based on reports provided by Cushman & Wakefield dated May
10, 2013. Home office owned by J.C. Penney Corporation, Inc.
Mortgaged Properties at JCP Corp: 37 stores
with appraised value of $322 million
J.C.
Penney’s
real
estate
portfolio
consists
of
306
owned
stores,
123
ground
leased
stores,
675
leased
stores,
15
distribution centers (6 leased, 9 owned), the home office and affiliated land in
Plano, TX and miscellaneous other real estate
assets¹
Cushman & Wakefield performed appraisals that concluded $3.3 billion of total
appraised value for the owned and ground leased stores and $762 million of
total appraised value for the owned distribution centers and the home office
Term loan will have perfected mortgages on approximately 327 properties with
appraised value of $3.2 billion J.C.
Penney
Owned
and
Ground
Leased
Real
Estate
Overview
($
in
millions)
Mortgaged Properties at JCP Properties:
280 with appraised value of $2,225 million
Distribution
Centers
and
Home
Office
Ownership
Count
Appraised
Value
Owned
10
$762
Mortgaged Properties: All distribution centers
and home office (except for certain land) with
appraised value of $698 million
1
2
3
2
2
2
3 |
 -
11 -
Owned
and
ground
leased
properties
that
are
included
as
collateral
are
comprised
of
approximately
379
sites (including
stores,
distribution
centers
and
home
office)
with
an
appraised
value
of
$3.3
billion
and
estimated dark value of $1.7 billion
Of these 379 sites, approximately 52 owned and ground leased stores with fair
market value of less than $2 million are not required to be mortgaged
Although
there
will
not
be
leasehold
mortgages,
there
is
expected
to
be
meaningful
value
associated
with
some of the leases
Appraisals on leased stores are still being completed
On average, the ground leased properties have a remaining lease term (including
all extension options) of 51 years and
the
leased
properties
have
a
remaining
lease
term
(including
all
extension
options)
of
22
years
J.C. Penney Real Estate Portfolio
Note:
The number of perfected mortgages and the corresponding appraised value is subject
to change based on continuing diligence and title review of real estate portfolio.
Real Estate Collateral Overview
Store
Lit Appraised
Dark Appraised
Category
Count
SF
Value
Value
Stores by Ownership
Owned
306
40,372,552
$2,641,805,000
$1,520,270,000
Ground Leased
123
15,425,653
680,342,000
297,431,000
Leased
673
55,262,593
-
-
Total Stores
1,102
111,060,798
$
3,322,147,000
$
1,817,701,000
Properties by Mall Grade (Owned and Ground Leased Only)
A
105
16,641,652
$1,424,042,000
$913,826,000
B
148
20,971,787
1,140,390,000
589,895,000
C/D
44
5,531,785
168,470,000
52,560,000
Not Rated or Non-Mall
132
12,652,981
589,245,000
261,420,000
Other
1
10
16,995,286
762,400,000
385,300,000
Total Owned and Ground Leased Properties
439
72,793,491
$
4,084,547,000
$
2,203,001,000
1
Mall
grades
based
on
Green
Street
Advisors
Mall
Database.
Appraised
values
based
on
reports
provided
by
Cushman
&
Wakefield
dated
May
10,
2013.
Includes
distribution
centers,
home
office
and
affiliated
land. |
 II. Company Overview |
 -
13 -
Enterprise Sales
Stores: $11.3bn FY 2012 Sales
jcp.com: $1.0bn FY 2012 Sales
Services/Other:
$639mm FY 2012 Sales
FY 2012 Actual: $13.0bn
Multi-channel retailer with compelling assortment of private and national
brands Company Overview |
 -
14 -
Stabilization Underway
CEO with proven track record in turnarounds, strong vendor relationships and
understanding of industry and organization returns
Generous liquidity from ABL and new Term Loan allows time to address issues
Return to promotional pricing strategy
Home rollout and associated capital expenditures nearing completion
Inspirational in-store presentation on enhanced merchandise assortment
2013 Focus
Develop strategic business plan to guide execution
Deliver effective marketing and promotion to increase core customer visits and
spend Refine merchandising strategy to focus on private label, national
brands and attractions Profitable Growth Plan Being Developed
|
 J.C.
Penney's Established Position with the Consumer -
15 -
Founded more than a century ago by James Cash Penney, J.C. Penney has a long
heritage as a leading U.S. department store brand
Nearly half the families in America shop at J.C. Penney each year, which includes a
large, loyal customer base
Broad
geographic
footprint
of
1,104
stores
in
49
states
and
Puerto
Rico
provides
easy
access to consumers
Compelling
assortment
of
sought
after
national
brands,
including
Levi’s
,
Nike
,
Izod
,
Carter’s
and Vanity Fair
Well
established,
trusted
private
brands
that
are
valued
by
core
customers,
including
The Original Arizona Jean Co.
, St. John’s Bay
, Worthington
, Stafford
, a.n.a.
and
Xersion™
Exclusive “attractions”
that bring excitement and aspiration to the shopping experience,
including
Sephora inside JCP,
Liz
Claiborne
,
Joe
Fresh™,
Happy Chic
by
Jonathan
Adler,
MNG
by
Mango
and
Aldo’s Call it Spring
Store base as of most recent 10-K consisted of 306 owned, 123 ground leased
and 675 leased properties. Current store base consists of 1,102 stores as two
leased stores have closed since February 2, 2013.
1
1 |
 Market and message to the customer on key shopping occasions emphasizing key brands
and attractions
Clearly communicate the style/quality and price offered as a compelling customer
proposition Offer
compelling
promotions
that
drive
traffic
to
stores
and
.com
as
well
as
build
“spend”
and
basket size
Capitalize
on
being
the
value/price
leader
of
the
anchors
in
650
malls
and
comparable
to
off-mall
competition
Focus promotional “spend”
for peak shopping periods
Create a sense of urgency on the top 26 shopping occasions
Engage national brand partners to participate and share in promoting JCP as having
headquarters assortments
Become preferred destination based on presentations, ownership and shopping
experience -
16 -
Re-Connecting with the Customer |
 -
17 -
Compelling assortment of merchandise
with visual clarity and respectful service
Balance of best of “national brands,”
“private brands”
and
“attractions/exclusives”
In stock on best of seasonal fashion and
basic merchandise
Fashion authority for moderate customer
lifestyle within their family budget
In-stock for sought after basic items
Focus on having their size
“Findmore”
connection of assortments in
stores and .com availability
Re-Launch of St. John’s Bay casual
sportswear -
$1 billion+ private brand
Dropped
in
2012
–
customers
extremely
vocal in their disappointment
Focus on Merchandise Breadth and Depth |
 An
Exciting Destination for Customers -
18 -
Visual
clarity
without
clutter
has
been
recognized
and
valued
by
customers
505 new Home stores to launch June 6th
New attractions differentiate from Kohl’s and mass merchants
8 million square feet transformed in 2012, 10 million under construction in
2013 Compelling new presentations of Sephora, Liz Claiborne, MNG by Mango,
Arizona, Levi’s, etc. Suppliers very supportive of forward-looking
merchandise and differentiation New presentations by national suppliers are
meeting their increased expectations |
 -19 -
Restoring “customer value proposition”
Act based on consumer “insights”
and preferences
Communicate
brands,
offers
on
key
occasions
–
a
compelling
“call to action”
Become the leader in associate engagement
Strengthen
the
leadership
team
–
capitalize
on
experience
and
new talent
Build bench strength and succession in key roles
Buy
and
sell
merchandise
on
a
profitable
basis
–
capitalize
on
P&A strengths
Assume strong financial foundation and improve balance sheet
Adhere to strong ROIC disciplines
Winning with
CUSTOMERS
Winning with
ASSOCIATES
Winning with
STAKEHOLDERS
An Energetic Path to Profitable Growth |
 III. Key Investment Highlights |
 Key
Investment Highlights -
21 -
Positioned for Improving Profitability
Significant Collateral Coverage
Strengthened Liquidity Position |
 Positioned for Improving Profitability
Return
to
promotional
strategy,
which
has
historically
delivered
consistent
gross
margins
Re-introduction
of
historically
strong
private
label
brands
such
as
St.
John’s
Bay
Initial sales of new attractions have been positive
Majority of store capital expenditures expected to be completed in 1H 2013
-
22 -
Merchandising strategy refocuses on core customer
Significant capital invested into existing store base
SG&A reductions increase operating leverage
CEO with proven track record in turnarounds, strong vendor relationships
and understanding of industry and organization returns
|
 First lien on high quality, desirable real estate assets
Second lien on high value inventory and receivable collateral
Structurally
senior
to
$2.6
billion
unsecured
bonds
with
respect
to
large
majority
of
assets³
Additional collateral available includes value of under-market leases,
trademarks (including J.C. Penney, Liz Claiborne, St. John’s Bay and
Arizona), liquid short-term investments and miscellaneous other
assets $3.9 billion of equity value behind debt complex
Significant Collateral and Enterprise Value Coverage
($ in millions)
1
Residual
value
of
ABL
collateral
calculated
as
80%
of
book
value
of
inventory
less
letters
of
credit
outstanding
and
ABL
borrowings
as
of
May
4,
2013.
2
Excludes values of non-mortgaged properties at J.C. Penney Corporation and all
leased properties. 3
Assumes satisfaction and discharge of $254 million 7.125% debentures due 2023 and
market capitalization of $3.9 billion as of May 10, 2013. Appraised Value of
Real Estate Collateral
2
Residual Value of
ABL Collateral
1
Hard Collateral
New Term Loan
Enterprise Value
3
$4,248
$1,750
$7,085 |
 Strengthened Liquidity Position
Pro forma liquidity of $2.7 billion
No near-term debt maturities
Fully-funded pension obligations with no required cash contributions
Normalized capital expenditures upon completion of Spring 2013 attractions
Increased working capital balances ahead of Home launch
-
24 -
Summary of Pro Forma Liquidity ($ in millions)
Balance Sheet Cash
$821
ABL Availability
531
Proposed Senior Secured Term Loan
1,301
Total Liquidity
$2,653
Calculated as $1,850 million assumed borrowing base less $469 million letters of
credit and $850 million ABL borrowings as of May 4, 2013. Senior Secured
Term Loan shown net of estimated fees, original issue discount, and cost to satisfy and discharge $254 million 7.125% debentures due 2023.
1
2
1
2 |
 IV. Financial Overview |
 Financial Overview
Sales
Focus on core customer with proven marketing and promotion to stabilize traffic
and increase conversion
Gross Margin
Return to more consistent and historical levels by re-positioning the business
to center on a more traditional promotional strategy
SG&A
Lower run rate driven by actions already taken provides operating leverage
Capital Expenditures
Return to normalized levels after Home launch
-
26 - |
 Summary of Historical Financial Performance
($ in millions)
-
27 -
Summary of Historical Financial Performance
($ in millions)
FY ‘09
FY ‘10
FY ‘11
FY ‘12
Sales
$ 17,556
$ 17,759
$ 17,260
$ 12,985
Comps
(6.3)%
2.5 %
0.2 %
(25.2)%
Gross Margin %
39.4 %
39.2 %
36.0 %
31.3 %
SG&A
$ 5,410
$ 5,358
$ 5,109
$ 4,506
Adj. EBITDAP
$ 1,497
$ 1,579
$ 1,311
$(306)
% of Sales
8.5 %
8.9 %
7.6 %
(2.4)%
Capex
$ 600
$ 499
$ 634
$ 810
% of Sales
3.4 %
2.8 %
3.7 %
6.2 %
Note: Adjusted EBITDAP defined as: net income before interest, income taxes, depreciation and
amortization, less qualified pension expense, restructuring expense, aged inventory reserves,
impairments and book gains from real estate transactions. Please refer to page 36 for a reconciliation of Net Income to Adjusted EBITDAP.
|
 Gross
Margin Review -
28 -
FY ‘11 Gross Margin
36.0 %
Everyday selling margin impact
2.4%
Clearance mix impact
(3.2)%
Clearance selling margin impact
(1.4)%
Markdowns and reserves
(0.7)%
Lower cost concessions
(0.5)%
Other
(1.4)%
FY ’12 Gross Margin
31.3 %
Quarterly Gross Margin FY ‘09 –
FY ‘12
Pricing strategy had significant
impact on clearance mix
Increased from 14% of sales in
FY ’11 to 22% in FY ‘12
With corresponding negative effect
from decrease in everyday
Decreased from 86% of sales in
FY ‘11 to 78% in FY ‘12 |
 SG&A Savings
($ in millions)
-
29 -
FY ’11 SG&A
$ 5,109
Salaries and benefits
(386)
Advertising
(106)
Private label credit card
(95)
Catalog outlet stores and specialty websites
(71)
Information technology
25
Miscellaneous items
30
FY ’12 SG&A
$ 4,506
SG&A expenses declined $603 million to $4,506 million as a result of cost
savings initiatives and actions taken in 2012 |
 V. Syndication Overview |
 Indicative Summary of Terms
Senior Secured Term Loan
Borrower
J.C. Penney Corporation
Guarantors
J.C. Penney Company, Inc. (“Holdings”) and all material subsidiaries of
J.C. Penney Corporation Security
1 lien on substantially all tangible and intangible assets (except for
ABL collateral) of the Borrower and the Guarantors, including fee owned and
ground leasehold interests in real property, intellectual property, machinery, equipment and
equity interests in and intercompany debt owed by all subsidiaries of the
Borrower 2 priority
lien
on
ABL
collateral
Use of Proceeds
Liquidity, working capital needs and to finance the satisfaction
/ discharge of $254 million 7.125% debentures due 2023
Size
$1.75 billion
Tenor
5 years
Amortization
1.00% per annum
Ratings
(Moody’s / S&P / Fitch)
Corporate:
TBD / CCC+ / B-
Tranche:
TBD / B / BB-
Indicative Pricing
L+TBD (TBD LIBOR floor)
Call Protection
102 / 101 / par
Mandatory Prepayments
Asset Sales, Insurance Proceeds and Excess Cash Flow sweep with step downs
TBD Financial Covenants
None
Negative Covenants
Standard and customary, including, but not limited to: incurrence of additional
debt, asset sales, liens, restricted payments, investments, mergers and
acquisitions, transactions with affiliates -
31 -
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 -
32 -
Transaction Timetable
Week of
Day
Key Event
May 13
Tue May 14
Lender Meeting
Thu May 16
1
Quarter Earnings Announcement (post-market close)
May 20
Tue May 21
Commitments Due
Wed May 22
Allocate Term Loan
Wed May 22
Expected Closing and Funding
Bank Holiday
Key Syndication Date
May 2013
S
M
T
W
T
F
S
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
st |
 VI. Conclusion and Q&A |
 Supplemental Materials |
 Real
Estate Appraisal Methodology Valuation Methodology
For owned properties and properties with ground leases with terms > 30 years,
Cushman employed a direct capitalization approach
For ground leased properties with remaining terms of less than 30 years, Cushman
employed a discounted cash flow approach
Asset quality, mall location and quality, local market conditions and the length
of the remaining
lease
term
were
used
to
determine
capitalization
rates
and
discount
rates
Market rent was determined by analyzing rent comparables and by looking at rent to
sales and total occupancy cost ratios based on projected sales
levels. Higher ranked stores were
considered more productive assets and were afforded a higher rent to sales
ratio Dark Value Estimates
The dark valuation methodology accounts for deductions for rent loss, expenses
borne by the landlord during lease-up, tenant improvements and leasing
commissions Wider cap rates (100 –
200bps) were used to account for the higher risk associated with stores
assumed to be vacant and to afford entrepreneurial profit for investors
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35 - |
 Adjusted EBITDAP Reconciliation
($ in millions)
FY ‘09
FY ‘10
FY ‘11
FY ‘12
Net Income (Continuing Operations)
$ 249
$ 378
$(152)
$(985)
Income Tax
154
203
(77)
(551)
Interest
260
231
227
226
D&A
495
511
518
543
Primary Pension
298
221
87
315
EBITDAP Subtotal
$ 1,456
$ 1,544
$ 603
$(452)
Impairments (Real Estate & Other)
42
3
58
86
Restructuring
0
32
451
298
Gross Margin and Inventory
0
0
207
155
Other (Real Estate & Other)
(1)
0
(8)
4
Gain on Sale of Non-Core Real Estate
(397)
Adjusted EBITDAP
$ 1,497
$ 1,579
$ 1,311
$(306)
-
36 - |
 Authorization Letter
May 13, 2013
Goldman Sachs Bank USA
Barclays Bank PLC
J.P. Morgan Securities LLC
Merrill Lynch, Pierce, Fenner & Smith Incorporated
UBS Securities LLC
Ladies and Gentlemen:
We refer to the proposed $1,750,000,000 Term Loan Facility (the "Facility")
for J.C. Penney Corporation, Inc. (the "Company") that you are arranging at our
request, and the Lender Presentation forwarded herewith (the "Lender
Presentation"). We have reviewed or participated in preparing the Lender Presentation
and the information contained therein.
Yours sincerely,
J.C. Penney Corporation, Inc.
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37 -
The Company has reviewed the information contained in the Lender Presentation and represents and
warrants to you that the information contained in the Lender Presentation (other than financial
projections and information of a general economic or general industry nature, but including the information
contained in the public filings referenced therein) is, when taken as a whole, complete and correct in
all material respects and does not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained therein, in light of the circumstances under
which they were made, not materially misleading. Any management projections or forward-looking
statements included in the Lender Presentation are based on assumptions and estimates prepared
by management of the Company in good faith and management believes such assumptions and estimates to be
reasonable as of the date of the Lender Presentation. Whether or not such projections or forward
looking statements, which by their nature are subject to significant uncertainties and
contingencies, are in fact achieved will depend upon future events many of which are not within the control of the Company.
Accordingly, actual results may vary from the projections and such variations may be material.
The projections included in the Lender Presentation should not be regarded as a representation
or warranty by the Company or its management that the projected results will be achieved. The Company represents and warrants that the information contained in the Lender Presentation
is either publicly available information (or at the time of the Lender Presentation will be
publicly available information) or not material information (although it may be sensitive and proprietary) with respect to the Company,
its subsidiaries, affiliates or their respective securities for purposes of United States federal and
state securities laws.
We request that you distribute the Lender Presentation to such financial institutions as you may deem
appropriate to include in the Facility. We agree that we will rely on, and that you are
authorized to rely on, the undertakings, acknowledgments and agreements contained in the Notice to and Undertaking by Recipients
accompanying the Lender Presentation or otherwise acknowledged by recipients of the Lender
Presentation. This letter is delivered solely to you in your collective capacities as
arrangers of the Facility, and each lender or prospective lender under the Facility shall be entitled to rely only on the representations and
warranties contained in any executed agreements relating to the Facility.
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