JCPenney Reportedly Headed Toward Debt Talks as Holiday Shopping Season Looms

J.C. Penney Company Inc. is reportedly readying talks with creditors on ways to reduce its debt load.

According to a report by Bloomberg, unnamed sources with knowledge of the matter disclosed that advisers of the beleaguered retailer and some of its bondholders are close to inking nondisclosure agreements, which could happen as soon as the end of the month.

The move would give lienholders and unsecured bondholders access to confidential company information as they continue to urge JCPenney to consider a swap or extension on its debt — valued at roughly $4 billion, according to filings with the U.S. Securities and Exchange Commission. It also buys the department store chain more time to get its business in order ahead of the crucial holiday shopping season.

JCPenney had hired debt restructuring advisers in mid-July as part of its turnaround plan. After taking the helm in October 2018, CEO Jill Soltau has made a concerted push toward a retail makeover, closing a few dozen underperforming stores and hiring new talent at the start of the year. The company also recently announced a partnership with ThredUp, arranging for 30 of its stores to soon offer a selection of the online consignment company’s secondhand apparel and accessories, which will be curated weekly.

The Plano, Texas-based retailer has been at risk of delisting from the New York Stock Exchange, following months of slumping earnings reports that have driven its share price below $1 this year. In the second quarter, JCPenney managed to reduce its losses from $101 million the prior year to $48 million, or 15 cents per share. However, sales declined more than expected, dropping 7.4% to $2.62 billion compared to analysts’ forecasts of $2.69 billion.

Over the last month, a number of JCPenney leaders, including Soltau and chairman Ronald Tysoe, snapped up a collective 1.35 million shares worth roughly $777,000 to provide a cash infusion. The company — whose credit rating has been downgraded twice in the last seven months by S&P Global and which has been added to Fitch Ratings’ “loans of concern” list — also remains at high risk of defaulting on a $1.57 billion loan balance.

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