JCPenney Hires AlixPartners as Debt Issues Grow

JCPenney has hired turnaround and restructuring firm AlixPartners LLP as the company looks for ways to survive its growing debt brought on by COVID-19 related business issues.

According to Bloomberg, AlixPartners joins a growing list of advisers, including legal firm Kirkland & Ellis LLP and Lazard Ltd., the latter an investment bank that is also working with Macy’s.

Yesterday, Moody’s dropped its credit default rating for Penney’s, according to Seeking Alpha.

“Although J.C Penney liquidity is adequate, the widespread store closures as a result of the coronavirus pandemic and the continued suppression of consumer demand is expected to pressure J.C. Penney’s EBITDA, impede its turnaround strategy and weaken its leverage to unsustainably high levels,” Seeking Alpha quoted Moody’s VP Christina Boni.

Moody’s anticipates cash flow issues throughout fiscal 2020, with slow recovery coming in 2021. But it could take until 2020 for EBITDA to recover to its 2019 level. Penney’s has a $4 billion debt load and has drawn $1.25 billion from its $2.35 billion revolving credit line, Bloomberg reported.

Like other retailers, Penney’s has closed stores and furloughed store associates along with many from its corporate workforce in its office here, in Salt Lake City and its design studio in New York.