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S&P cuts rating on JC Penney term loan

NEW YORK (AP) -- Standard & Poor's Ratings Services is lowering the rating it gave J.C. Penney's term loan further into junk status because the struggling department store operator boosted the loan's size.

J.C. Penney Co. increased the size of the term loan to $2.25 billion from $1.75 billion.

S&P said Tuesday that it is cutting the rating for the term loan to "B-" from "B." It maintained all of the Plano, Texas company's other ratings. The outlook is negative.

J.C. Penney has been struggling with weak sales for some time and recent efforts to revitalize the retailer flopped. The company has since appointed a new CEO, but investors remain skeptical.

On Thursday the J.C. Penney reported that its first-quarter loss widened on a 16 percent drop in revenue. It marked the fifth-straight quarter that the chain has posted large declines.

The results show that J.C. Penney is still reeling from the turnaround plan orchestrated by former CEO Ron Johnson, who was ousted last month after less than a year and a half on the job.

The plan included getting rid of coupons and most sales in favor of everyday low prices, bringing in hip brands like Joe Fresh and remaking outdated stores. But the changes that were meant to attract younger, wealthier shoppers, wound up turning off its loyal middle-income, middle-age customers who favor sales and basic merchandise like loose-fitting khakis.

Last month J.C. Penney rehired Johnson's predecessor, Mike Ullman, who is resuming sales and bringing back basics. It also announced the term loan from Goldman Sachs in April, a move that helped to ease concerns that J.C. Penney could run out of cash this year.

The Plano, Texas-based company's stock added 14 cents to $18.95 in midday trading. They have ranged from $13.55 to $32.55 over the past year.