Time is running out for J. C. Penney Company Inc., which has just days to make a hefty debt payment or it could find itself forced into bankruptcy.
The struggling retailer has until Friday to make the roughly $12 million interest payment it failed to pay its lenders last month. If it’s unable to make that payment within the 30-day grace period, those lenders could request the full payment of money owed before its due and the Plano, Texas-based chain might be forced to declare Chapter 11 protection to rework its finances.
JCPenney skipped out on another $17 million payment on Thursday and was given a grace period of five business days before it goes into default.
FN has reached out to the company for comment.
In late April, reports emerged that JCPenney was in the “advanced” stages of bankruptcy funding talks with lenders as the coronavirus pandemic creates potentially insurmountable challenges for the already-beleaguered retailer. It had reportedly been seeking out a debtor-in-possession loan that would continue to fund its operations during Chapter 11 proceedings.
As of February, JCPenney had $386 million in cash on hand, plus the roughly $1.25 billion it tapped from its $2.35 billion revolving credit line two months ago. A bankruptcy filing could give the company the opportunity to save money on imminent debt payments and resolve some of its financial issues.
Analysts have so far raised concerns about protracted store closures as well as a decline in foot traffic even when the retailer’s locations reopen post-COVID-19. Two weeks after shuttering its 850 stores in mid-March, JCPenney announced that it would furlough scores of workers and take additional actions to maintain flexibility, including deferring capital spend, cutting expenditures and pausing hiring efforts.
For several years, JCPenney has struggled with a declining sales, numerous leadership changes and increased digital competition. As a result, investors have largely lost faith in the retailer, pushing its stock below $1 and putting it at risk of being delisted from the New York Stock Exchange.