JCPenney is reportedly talking with multiple bank lenders, including JP Morgan Chase, Wells Fargo and Bank of America, to secure between an $800 million and $1 billion loan package for a potential upcoming bankruptcy filing.
<a href="https://www.wsj.com/articles/j-c-penney-in-advanced-talks-for-bankruptcy-financing-11587688846">The Wall Street Journal</a> reports exclusively that the company has entered “advanced talks” for the bankruptcy loan package, with people familiar with the matter telling the news agency that a filing could happen in the next few weeks. The journal reports that the loan package may include an unspecified amount of existing debt.
The retail giant is just one of the many companies that has had existing financial problems exacerbated by the coronavirus pandemic and the associated widespread closures. The reported development comes a little over a week after the retailer announced that it missed a deadline to pay off a $12 million debt.
&#8220;JCPenney made the strategic decision to &#8230; take advantage of the 30-day grace period to continue ongoing discussions with lenders and maximize financial flexibility,&#8221; said the retailer in a statement, reports <a href="https://www.cnn.com/2020/04/15/business/jcpenney-missed-payment/index.html">CNN Business</a>.
&#8220;JCPenney has been engaged in discussions with its lenders since mid-2019 to evaluate options to strengthen its balance sheet, a process that has become even more important as our <a href="https://www.cnn.com/business/live-news/stock-market-news-today-031820/h_66cc297ed6eefce2fca957ef97462789">stores have also closed</a> due to the pandemic,” said the statement.
Stocks in the department chain have been declining for nearly a decade, peaking at about $41 per share in February 2012, and having dropped to below $1 per share since early January 2020.
Retail Dive, a news site for industry developments and announcements, says that the fall of JCPenny can be arguably <a href="https://www.retaildive.com/news/wsj-jc-penney-moves-closer-to-bankruptcy/576725/">attributed</a> to decisions made by former CEO Ron Johnson, who took hold of the company amidst a need for a “serious turnaround push.”
<blockquote>Under Johnson, Penney instituted a series of untested changes to its stores, merchandising and pricing. The transformation ultimately alienated customers and hammered its sales so badly that the company took on billions of dollars in new debt to fund losses&#8230;
Penney was already in need of a serious turnaround push when Johnson came aboard. Hence the drastic changes he made at the department store, which some argue might have worked given more time, better messaging, and certainly more testing and refining.</blockquote>
JCPenney announced at the end of March that they would furlough the majority of their 95,000 employees, a move many stores have been forced to take.
&#8220;These are difficult days all across the country and the globe,&#8221; said CEO Jill Soltau in a statement, reports <a href="https://www.usatoday.com/story/money/2020/03/31/coronavirus-j-c-penney-co-furlough-most-95-000-employees/5095990002/">USA Today</a>. &#8220;At JCPenney, we are making tough, prudent decisions to protect both the safety of our associates and the future of our company.”
CNBC reported on Friday that department store chain Neiman Marcus is also in the <a href="https://www.cnbc.com/2020/04/24/neiman-marcus-eyes-sunday-bankruptcy-filing-600-million-emergency-funding.html">process of securing</a> as much as $600 million for a loan, noting that the retailer may file for bankruptcy as early as Sunday. According to Reuters, the chain employs about 14,000 people, many of whom have been furloughed, and <a href="https://www.nytimes.com/reuters/2020/04/19/business/19reuters-neimanmarcus-bankruptcy-exclusive.html">recently missed</a> a multi-million dollar debt payment.
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Report: JCPenney In ‘Advanced Talks’ To Secure Bankruptcy Loan