J.C. Penney (NYSE:JCP) issued a press release today calling "untrue" yesterday's news report that commercial lending company CIT (NYSE:CIT) had suddenly quit financing deliveries to its stores from smaller vendors.

In a news story it labeled "exclusive," the New York Post said unnamed insiders "speculated that CIT got skittish after getting a peek at Penney's financials, which have been deteriorating as the department store scrambles to recover from a botched turnaround bid under former CEO Ron Johnson."

Penney said in its statement that CIT had told it the Post's report was not true and that "CIT continues to factor and support deliveries from jcpenney suppliers."

CIT is what the industry calls a "factor," which makes cash advances to suppliers based on the goods they sell to the merchant. If vendors and factors become wary of a store's creditworthiness, the retailer may have to pay suppliers cash upfront for goods, which could be a huge drain on liquidity. If suppliers stop shipping goods, it can be a death knell for a retailer.

Penney shares dove more than 13%, from $16.30 to $14.13, after the Post's story appeared. Shares are at $14.87 as of this writing.

-- Material from The Associated Press was used in this report.


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