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JCPenney's debt rating cut

Fitch Ratings, a major bond rating service, has cut its ratings on J.C. Penney Co.'s unsecured debt to "BB" from "BB+," citing the "unsure economic outlook and the competitiveness of the drug store and department store sectors."

At the same time, Fitch downgraded its rating of the retailer's convertible subordinated notes to "B+" from "BB-" and assigned a rating of "BB+" to the company's new $1.5 billion secured bank facility. The rating outlook was revised to stable from negative, Fitch said, "reflecting the progress Penney has made in turning around its drugstore and department store operations and the expectation that the company will continue to make gradual progress in improving profitability from current weak levels."

Fitch took note of the progress Penney has made in turning around its operations but said it remained concerned about the economy and "the uncertainty regarding the ultimate success" of Penney's new operating strategies.

"Penney's operating performance began to improve in 2001, as the company has begun to execute its turnaround plans and restore profitability. Changes made have included the transformation to a centralization of the merchandising function at the department stores, which is leading to improved assortments and more timely movement of goods into the stores. In addition, Eckerd's is implementing new pricing and marketing strategies, and is reconfiguring its stores to boost sales of higher-margin general merchandise," the service said.

As a result, said Fitch, "after deteriorating for several years due to weak operations, Penney's credit measures began to improve in 2001." While still weak for the rating category, Fitch said it expects Penney to strengthen over the medium term as profitability and cash flow improve. Fitch said, "Penney's liquidity remains strong, with $2.3 billion of cash remaining after the recent repayment of a $700 million debt maturity."

Spiegel delisted from NASDAQ

Common stock of The Spiegel Group has begun trading on the over-the-counter market after being delisted from the Nasdaq market, due in part to the retailer's delinquency in filing financial reports.

The company has yet to file its annual report for the 2001 fiscal year and financials for the first quarter of 2002. The company said it will file those reports with the Federal Securities and Exchange Commission once it has reached an agreement with its bank group to restructure its existing credit facilities. Spiegel said that by waiting until the new credit pact is in place, it will receive an unqualified audit opinion from its outside auditor.

Spiegel, headquartered in Downers Grove, IL, said its majority shareholder, Germany's Otto family, continues to provide enough liquidity to keep the company operating at normal levels and to continue to make on-time payments to all merchandise vendors.

Spiegel's Class A common stock is now trading on the over-the-counter market under the ticker symbol SPGLA.

Job layoff pace slows in May

U.S. companies laid off workers in May at the slowest pace in a year, and the 84,978 job cuts announced in May fell 25 percent from the 112,649 layoffs recorded in April, said Challenger, Gray & Christmas, the international outplacement company that tracks job-cut announcements.

But the good news didn't last for long, and June is another story, with IBM announcing 16,000 layoffs soon, and Hewlett Packard setting up a rapid timetable for another 15,000 cuts, which had previously been announced.

May, typically a slow month for layoffs, marked the first time since May 2001 that job-cut announcements fell beneath the 100,000 mark.

Year-to-date, layoff announcements total 640,761, down 1.8 percent from the 652,510 recorded a year ago.

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