S&P: J.C. Penney view stable

Standard & Poor's said it revised its outlook on J.C. Penney Co. Inc. to stable from negative and affirmed all ratings on the company.

S&P said the outlook change reflects a beneficial deleveraging of the company's balance sheet as the company implements a plan to reposition its capital structure, as well as higher second-quarter earnings guidance following July sales that exceeded expectations.

J.C. Penney announced that it has completed the sale of its Eckerd drugstore operations to CVS Corp. and Jean Coutu (Canada), realizing net proceeds of $3.5 billion. This, together with $1.1 billion of existing cash, will be used to repurchase up to $2.35 billion of common stock, retire $1.65 billion of debt in 2004 and 2005, call for redemption $650 million of convertible debt, and repurchase up to $650 million of common stock that will be issued upon the conversion.

Based on this plan, S&P said it estimates that year-end debt will total about $3.9 billion for 2004 and that lease-adjusted total debt to EBITDA will approximate 3.0x.

S&P currently rates J.C. Penney's corporate credit, bank loan and senior unsecured debt at BB+ and subordinated debt at BB-.

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