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J.C. Penney in talks to raise more money: source

Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid

By Olivia Oran and Phil Wahba

(Reuters) - J.C. Penney Co Inc (JCP) is looking to raise more money, possibly through a combination of debt and equity, according to a source familiar with the matter.

Goldman Sachs (GS.N) is advising Penney, the source said, adding that the U.S. retailer is in early talks with banks and institutional investors. The company is evaluating all alternatives with regard to raising capital, the source said.

A spokesman for Goldman Sachs declined to comment. Representatives for Penney did not immediately return requests for comment.

Goldman this spring arranged a $2.25 billion loan for the department store chain to shore its finances after a precipitous drop in sales last year.

Penney has been struggling after a failed attempt in 2012 to remake itself into a trendier store led to a 25 percent drop in sales. Penney has brought back the heavy discounting that was its hallmark to win back customers it lost, but sales again declined in the quarter that ended in August.

Penney said when it reported quarterly results last month that it expected to end the fiscal year with $1.5 billion in cash.

Bloomberg earlier reported news of Penney's potential capital raise.

Separately, Vornado Realty Trust (VNO) disclosed on Friday it had sold off its entire stake in Penney, a move it had said last week it would make.

Penney shares fell 1 percent to $12.80 in after hours trading.

(Reporting by Olivia Oran and Phil Wahba in New York; Editing by Richard Chang and Leslie Gevirtz)