With its 850 US shops closed indefinitely in the midst of a pandemic, J.C. Penney is reportedly considering filing for bankruptcy protection, sources who are familiar with the situation told Reuters, Tuesday.
The Plano, Texas-headquartered business has access to significant cash to thrive in the coming months, even as profits have been severely depleted as a result of massive closures, sources said.
Nevertheless, J.C. Penney contemplates a bankruptcy move as one way of reworking its troubled balance sheets and saving money on its pending debt obligations, including substantial annual interest expenditures, sources stated.
The iconic American retail firm has made no definitive decisions on how it will deal with its troubled finances, the sources bared. The company is also seeking some breathing room from its creditors through a deal that would fix its debt outside bankruptcy court proceedings, the sources added.
The company was forced to furlough a good number of its 85,000 workers, and there are fears that customers may not return even when shops start to reopen, reports Reuters.
Though the retailer has enough money at its disposal at the moment to make it through the next few months, financial reports show it has a loan payment of around $12 million which is due Wednesday and a $105 million equity repayment in June.
J.C. Penney earlier this year unsuccessfully sought to convince investors to restructure and push back due dates on parts of its nearly $4 billion long-term debt without the need for insolvency proceedings.
It wanted to buy time for the turnaround strategy of Chief Executive Jill Soltau to bear fruit, as it faced stiff pressure from e-commerce companies as well as discount stores including the TJX Cos Inc's Marshalls and T.J. Maxx group.
The pandemic-linked problems facing J.C. Penney have resulted in lower creditworthiness and more talk of potential bankruptcies.
Ratings agency Moody's downgraded the corporate credit scores of J.C. Penney with a pessimistic forecast that was revised from positive.
Since last summer J.C. Penney has been consulting with financial experts and its lenders. Those talks become much more critical as our stores have closed as a result of the coronavirus, a spokeswoman said Tuesday in an emailed statement.
J.C. Penney has turned to consulting agency AlixPartners as the company looks at options for dealing with its ballooning debt, according to a Bloomberg report, citing sources with information of the matter.
