JC Penney to miss $ 12 million loan payment as retailer considers bankruptcy

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JC Penney revealed on Wednesday that it will miss the due date for a loan repayment as company officials are reportedly considering bankruptcy following massive store closures linked to the coronavirus pandemic.

The distressed retailer had an April 15 due date to make an interest payment of $ 12 million on 6.375% senior notes due in 2036. In an 8-K filing, JC Penney said that ‘He would miss the due date, noting that he has a “30-day grace period” for repayment before loan defaults.

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“The company has chosen to enter the 30-day grace period for the payment of interest in order to assess certain strategic alternatives, none of which have been implemented at this time,” JC Penney said in the filing. of the SEC.

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Like many traditional retailers, JC Penney’s business has been under pressure in recent years due to declining in-store traffic and the move to digital outlets. The company’s struggles have worsened in recent weeks after the coronavirus pandemic forced the closure of 850 JC Penney stores.

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With recovery plans temporarily suspended due to the pandemic, JC Penney executives are considering filing for bankruptcy, Reuters reported Tuesday, citing sources familiar with the matter. While the retailer has enough cash on hand to survive store closings, bankruptcy protections would allow JC Penney to restructure its upcoming debt payments. The company owes nearly $ 4 billion in long-term debt.

While bankruptcy is one of many avenues for JC Penney, executives have yet to make a final decision. A spokesperson for JC Penney said the pandemic has “created unprecedented challenges for department store retailers.

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“JCPenney has been in discussions with its lenders since mid-2019 to assess options to strengthen its balance sheet and maximize its financial flexibility, a process that has become even more important as our stores have also closed due to the pandemic,” JC Penney said in a statement. “Since that time, the company has successfully met or exceeded its targets for the five financial targets for 2019 and recorded improved comparable store sales in six of the eight merchandise divisions in the second half of 2019 compared to the first semester. “

It is not known when it will be safe for JC Penney stores and other stores to reopen. According to Reuters, the possibility of low traffic in stores when stores reopened was among the considerations for executives considering bankruptcy.

“We remain focused on our renewal plan and look forward to reopening our doors,” the statement added.

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