J. C. Penney Company Inc. is considering filing for bankruptcy protection as the coronavirus disrupts its already-struggling business and throws its turnaround efforts into disarray.
According to an exclusive Reuters report, the beleaguered retailer is mulling bankruptcy as an option to rework its finances and save money on imminent debt payments. The media outlet’s sources added that concerns have also been raised about protracted store closures and a decline in foot traffic even when JCPenney‘s stores reopen post-pandemic.
While it has not yet made a final decision, the Plano, Texas-based chain is also said to be considering negotiations with its creditors to address debt in lieu of bankruptcy court proceedings. It could also potentially secure rescue financing.
JCPenney, which has reportedly been in talks with its banks over the past few weeks regarding liquidity needs, is also said to be negotiating a debt deal with lenders. A Bloomberg story on Monday reported that it hired the consultancy AlixPartners LLP to help it manage its debt load of about $4 billion.
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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, cut expenditures and paused hiring efforts. The retailer added that it had suspended merit bonuses for the year and was “evaluating other financial options.”
FN has reached out to JCPenney for comment.
Since taking the helm in October 2018, CEO Jill Soltau has shut down underperforming stores and hired new talent to revive the business. JCPenney also hired debt restructuring advisers in mid-July as part of its turnaround plan. Prior to the pandemic, it had been experimenting with new strategies seemingly aimed at returning the business to its glory days. It rolled out a series of new offerings, including dipping its toes into the outdoor and consignment markets, and launched a curbside pickup program.
However, the 118-year-old retailer has continued to struggle for several quarters with declining sales and digital competition that spooked investors and pushed its stock below $1, putting it at risk of being delisted from the New York Stock Exchange. What’s more, it was forced to furlough many store associates and corporate employees at the start of the month as its outposts across the country remain shuttered due to extended federal social-distancing guidelines.
“These are difficult days all across the country and the globe,” Soltau said in late March. “We are making tough, prudent decisions to protect both the safety of our associates and the future of our company.”
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