JC Penney in advanced talks for bankruptcy financing

A JC Penney store in Motebello, Calif., was closed last month as the coronavirus pandemic spread.

 

Photo:

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JC Penney Co. Inc.

is in advanced talks for bankruptcy financing with a group of lenders, a sign that the struggling retailer is on the verge of succumbing to the economic meltdown caused by the coronavirus pandemic.

Penney is in talks with existing lenders, including

Wells Fargo

& Co.,

Bank of America Corp.

and

JPMorgan Chase

& Co. for a so-called debtor-in-possession loan that would fund the department store chain’s operations during a court-supervised Louisiana bankruptcy attorney, according to people familiar with the matter.

The loan package could total around $800 million to $1 billion, with some of that money potentially including existing debt. The facility would likely be syndicated so other lenders could participate, the people said, with one warning the amount could change.

A bankruptcy filing could take place in the coming weeks, the people said. The company entered into a 30-day grace period after missing an interest payment due to bondholders on April 15. Creditors may enter into a forbearance agreement if the company needs more time to iron out negotiations before filing.

With

sear,

JC Penney

was one of the major department store chains of the last century. But the 118-year-old company has been losing money for years. With its mall stores closed and unlikely to reopen anytime soon, the company has been forced to shelve its latest turnaround strategy and face its creditors at the negotiating table.

As plans emerge to reopen parts of the US economy, a new WSJ/NBC News poll shows the majority of Americans believe it will be a long time before the economy can return to normal. Gerald F. Seib of the WSJ explains. Photo: G. Ronald Lopez/ZUMA Wire

Department stores were struggling before the pandemic forced the closure of most US stores.

Sears Management Corp.

filed for bankruptcy in 2018 and has continued to close stores and sell assets since emerging from court protection.

Macy’s Inc.

plans to close 125 locations over the next three years.

Kohls Body

sales fell for the last fiscal year, which ended February 1. Neiman Marcus Group Inc. is plans to file for bankruptcy any day, according to people familiar with the matter.

Signs are far from the only ones to see their businesses battered by the pandemic and the collapse of commercial activity. Energy companies have been hit in recent weeks by a combination of a market downturn and falling oil prices, leading several to seek restructuring advice or bankruptcy protection. A total of seven U.S. oil and gas drillers filed for bankruptcy in the first quarter of 2020, and more are expected to do so.

If the near total shutdown of activities forced by the coronavirus were to continue for much longer, companies in other sectors should follow suit.

Write to Cara Lombardo at [email protected] and Alexander Gladstone at [email protected]

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Appeared in the April 24, 2020 print edition as ‘.’

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