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The JCP bears’ principal argument rests on additional dramatic declines in sales contributing to balance sheet deterioration at the company. In fact, JCP’s balance sheet is equipped to handle even a large decline in sales for several reasons. Unlike most other retailers for which rent is an enormous fixed cost, JCP’s real estate cost is very low because it owns 50% of its stores and leases the balance at low single-digit rents. The company also benefits from long-term, low-cost debt with limited expirations over the next several years, more than $800 million of cash at the last quarterly report, $1.5 billion of undrawn revolver capacity, and more than $600 million of non-core assets that it can sell.
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