J.C. PENNEY Reportedly in Talks for Bankruptcy Financing

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J.C. Penney is reportedly prepping for a bankruptcy filing.

J.C. Penney is in talks with banks for a loan of $800 million to $1 billion to sustain at least some of operations during a bankruptcy process, according to a Wall Street Journal report citing people familiar with the matter.

The retailer is currently in discussions for debtor-in-possession financing with its existing lenders, including Wells Fargo, Bank of America, and JPMorgan Chase & Co., but the financing will likely be syndicated so other lenders can participate, according to the Journal report, and a bankruptcy filing could come in the next few weeks.

J. C. Penney Company, Inc., and J. C. Penney Corporation, Inc., said in a regulatory filing April 15, 2020 that they have elected not to make the approximately $12 million interest payment due and payable on April 15 with respect to their 6.375% Senior Notes due 2036 on the due date. Under the indenture governing the 2036 Senior Notes, the Company has a 30-day grace period to make the Interest Payment before such non-payment constitutes an “event of default” with respect to the 2036 Senior Notes. The Company has elected to enter into the 30-day grace period with respect to the Interest Payment in order to evaluate certain strategic alternatives, none of which have been implemented at this time.

According to Barrons, the department store has essentially halted its turnaround plan thanks to widespread lockdowns put in place to halt the spread of the coronavirus.

Reuters notes that the 118-year-old company, which was already grappling with competition from online and off-price retailers, has taken a severe hit from the coronavirus crisis. It recently shut its 850 department stores, furloughed some employees and slashed spending.

About J.C. Penney

J.C. Penney Corporation, Inc., is an American retail company, founded in 1902 by James Cash Penney and today engaged in marketing apparel, home furnishings, jewelry, cosmetics, and cookware. The company was called J.C. Penney Stores Company from 1913 to 1924, when it was reincorporated as J.C. Penney Co.

As reported in the Troubled Company Reporter, S&P Global Ratings in April 2020 lowered its issuer credit rating on J.C. Penney Co. Inc. (JCP) to ‘D’ from ‘CCC’.

On April 15, JCP did not pay interest due on its 6.375% senior notes due 2036 and S&P does not expect the company to make the payment within the 30-day grace period.

“We downgraded JCP because we believe the company will pursue a comprehensive out-of-court or in-court restructuring. The ‘CC’ rating on the company’s secured debt reflects our view that a default on these issues is a virtual certainty based on our expectation of a broader restructuring. The ‘C’ rating on its unsecured debt reflects its lower recovery prospects in a restructuring. The company had about $3.7 billion of outstanding debt as of Feb. 1, 2020,” S&P said.

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