J. C. Penney Company Inc. is reportedly in the midst of discussions with its key lenders to obtain $450 million in financing ahead of a bankruptcy filing that could come as soon as Friday.
According to CNBC, which cited people familiar with the situation, the debtor-in-possession loan would initially make available $225 million to the struggling department store, which would be required to hit certain goals to receive the remaining half. The lenders are still said to be working through the terms, which would protect their investment should JCPenney fail to deliver on its targets.
The funds are much less than the $800 million to $1 billion (including existing debt) that the retailer had reportedly sought, but it would allow the chain to continue operations during Chapter 11 proceedings.
FN has reached out to JCPenney for comment.
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The Plano, Texas-based company could be just days away from a bankruptcy filing. It has until Friday to make a roughly $12 million interest payment it failed to pay its lenders last month and also skipped out on another $17 million payment that was due on Thursday. If it’s unable to make its payments within the relevant grace periods, JCPenney would effectively go into default, and its lenders could request the full payment of money owed before its due.
As of February, the retailer 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 rework some of its finances.
For several years, JCPenney has struggled with 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. Analysts have also raised concerns about protracted store closures as well as a decline in foot traffic even when the chain’s locations reopen post-COVID-19.