Bill Ackman has settled on a strategy to shore up JCPenney’s balance sheet — and the name of the game is real estate.
The New York hedge-fund mogul is weighing an offer for a real estate-backed term loan from Goldman Sachs that would pump $1.75 billion into the cash-strapped retailer.
In addition, Penney is expected to receive a similar, competing offer from Barclays Capital next week, sources told The Post.
Ackman, Penney’s largest shareholder, is seeking a loan package whose size is “a number that is so big that everyone will say that JCPenney’s money problems are over,” according to a source close to the talks.
Barclays is expected to produce a financing proposal for Penney to rival the terms set forth by Goldman, sources said.
Goldman offered a loan due in five years carrying an interest rate between 6 and 7 percent, insiders said.
Ackman, who has hired Centerview Partners and Blackstone Group as advisers in the negotiations, is “waiting to see who has the best terms,” and is expected to make a decision as soon as next week, a source said.
The Post reported exclusively last week that Ackman was considering a massive real-estate-backed loan to shore up Penney’s fast-dwindling cash hoard — as opposed to a more modest-size package based primarily on inventory.
Penney’s cash on hand fell by more than one-third, to $930 million, at the end of its fiscal year.
The inventory-backed loan would have been in the $500 million range.
As he scrambles to repair damage done by former CEO Ron Johnson, Ackman has rejected the inventory-backed option, which had drawn interest from bidders that included a group led by Wells Fargo, sources said.
In addition to being less expensive and larger than the inventory-backed loan, Goldman’s real-estate loan, sources said, can be paid back at any time with only a small prepayment penalty.
Penney shares yesterday surged 11.6 percent, to $17, on the strength of both the real estate-backed loan, news of which broke mid-afternoon, and word that billionaire George Soros has bought an 8-percent stake in Penney.
Last week, Penney announced it had drawn down $850 million of a $1.85 billion credit line.
The massive real estate-backed loan figure surprised many investors, fueling speculation that sales have continued to plunge this spring in the wake of Johnson’s disastrous move last year to eliminate coupons and discounting.