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J.C. Penney in crunch talks over $450m loan as it eyes Friday bankruptcy filing

JC penney bankruptcy

US retailer J.C. Penney is in crunch talks over a $450m loan from key lenders before entering bankruptcy.

The troubled American department store is in discussions over a debtor-in-possession bank loan, which involves pledging certain assets a company owns as collateral to back the credit line, sources familiar with the matter told Reuters on Tuesday.

Under the plan, JCP would receive half of the $450m lifeline upfront, roughly half of the $1bn it was initially seeking, while the remaining $225m will be granted once the company hits certain performance milestones. J.C. Penney appears to be prepared to file for bankruptcy as early as Friday, though this deadline may be delayed.

The retailer’s stock has lost 76% this year, as nationwide store shutdowns stretch the company’s finances. However, J.C. Penney (JCP) shares opened Wednesday’s session with strong double-digit gains, posting a 38% jump during early morning trading to $1.50, possibly fueled by hopes of a potential comeback.

JCP stock chart ytd

The company may be prepared to close as many as 200 of its 846 department stores in the US as part of its restructuring efforts, though plans are yet to be finalized.

Founded in 1902 by James Cash Penney, J.C. Penney is one of the largest department stores in the United States, with over 90,000 employees and nearly 900 stores across the country. The firm has been struggling with lower sales and mounting debt as a result of increased online shopping.

The fall of J.C. Penney will add another name to the list of bankrupted retail store chains in the US, which include home goods store Pier 1 Imports, sports gear seller Modell’s Sporting Goods, and Neiman Marcus, an American luxury department store that filed for bankruptcy only a few weeks ago.

The Texas-based retailer has already defaulted on its corporate bonds and also reportedly tapped on financial advisory firm AlixPartners LLP to analyze every potential course of action moving forward. However, bankruptcy seems imminent for the firm, which accumulates around $5bn in liabilities according to its most recent financial reports.

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    Alejandro Arrieche

    Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and have also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.

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