JCPenney Negotiating With Lenders Over Bankruptcy Funding

J.C. Penney Company Inc. (NYSE: JCP) is negotiating bankruptcy financing with banks for a debtor-in-possession loan to secure liquidity for operations during bankruptcy.

What Happened

J.C. Penney is at an advanced stage of discussions with Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC) and JPMorgan Chase & Co. (NYSE: JPM) to secure funding to the tune of $800 million to $1 billion, through a debtor-in-possession loan.

Other lenders, too, could participate in the syndicated loan, according to sources cited by The Wall Street Journal.

The retailer could file for bankruptcy as early as the next few weeks. It has already missed an interest payment to bondholders due April 15. J.C. Penney’s creditors may enter a forbearance agreement to allow additional time to negotiate with lenders before filing, reported WSJ.

Why It Matters

J.C. Penney’s net loss for the full year was $268 million in 2019 compared with a $255 million loss the previous year.

Major retailers are under increasing financial pressures due to the COVID-19 pandemic, and their ability to survive is in doubt.

Ares Management Corp. (NYSE: ARES) owned Neiman Marcus is on the verge of bankruptcy. Meanwhile, even the prudential Macy’s Inc. (NYSE: M) is putting assets as collateral to secure financing to avoid the same fate as J.C. Penney. Nordstrom Inc. (NYSE: JWN) is also borrowing against real estate.

Price Action

J.C. Penney shares traded 5.49% lower at $0.26 in the after-hours session on Thursday. The shares had closed the regular session 10.18% higher at $0.28.