J. C. Penney Company Inc. is reportedly in the “advanced” stages of bankruptcy funding talks with lenders as the coronavirus pandemic threatens to create insurmountable challenges for the already beleaguered retailer.
An exclusive report from The Wall Street Journal suggested that the Plano, Texas-based chain was in negotiations with its existing group of lenders — including Bank of America Corp, JPMorgan Chase & Co. and Wells Fargo & Co. — for a debtor-in-possession loan that would continue to fund its operations during bankruptcy proceedings.
The loan package, according to the report, could be worth about $800 million to $1 billion — some of which might include existing debt. (JCPenney has a debt load of roughly $4 billion.)
Nevertheless, sources close to the situation told FN today that bankruptcy is not necessarily imminent for JCP and that the company was exploring other financial options.
A Chapter 11 filing from the struggling department store is rumored to take place in the coming weeks. On April 15, JCPenney entered into a 30-day grace period to “evaluate certain strategic alternatives” after opting not to make a $12 million interest payment due to bondholders. If the company fails to pay within that timeframe, it would result in an “event of default,” which would allow the lenders to request the full payment of money owed before it’s due. (The 6.375% senior notes are due 2036.)
That Securities and Exchange Commission filing came the same day reports emerged that JCPenney was mulling bankruptcy as an option to rework its finances and save money on imminent debt payments. 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-pandemic.
Two weeks after shuttering its 850 stores in mid-March due to government-mandated closures, JCPenney announced that it would furlough scores of workers and take additional actions to maintain its financial flexibility. It deferred capital spend and tapped $1.25 billion from its $2.35 billion revolving credit line, as well as cut expenditures and paused hiring efforts. The company added that it had also suspended merit bonuses for the year and was “evaluating other financial options.”