Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

J.C. Penney Company, Inc. (JCP), Goldman Sachs Group, Inc. (GS): When $1.75 Billion Isn’t Enough

Now, based on the new $2.25 billion principal amount, J.C. Penney’s annual net interest expense will increase by almost $133 million, or a total of nearly $670 million over the five-year term of the loan.

Of course, this is great for the bottom line of Goldman Sachs Group, Inc. (NYSE:GS), assuming J.C. Penney will be able to repay the loan in full, but there’s undoubtedly risk involved for both companies. On that note, if J.C. Penney can’t deliver on its turnaround, you can bet the folks at Goldman Sachs Group, Inc. (NYSE:GS) will be the first in line to collect.

Foolish final thoughts
In the end, desperate times call for desperate measures, and I think it’s safe to say J.C. Penney is definitely desperate. However, while this huge loan is necessary for J.C. Penney to have a chance at survival, it’ll only make it that much harder for the company to start making money again. As a result, I’m standing by my assertion that investors should steer clear of J.C. Penney stock.

The article When $1.75 Billion Isn’t Enough originally appeared on Fool.com is written by Steve Symington.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.