JCPenney Makes Interest Payment as It Weighs Options

Troubled department store chain is viewed as a likely restructuring candidate

jc penney storefront
JCPenney made a roughly $17 million interest payment on its term loan while considering its strategic options.
JCPenney

Troubled department store chain JCPenney made an interest payment of about $17 million on its term loan that had been due back on May 7, the company said in a public filing today.

According to the retailer, it had a five-day grace period to make the payment before it was considered in default. The grace period allowed JCPenney to evaluate what it described as strategic alternatives.

JCPenney said that while none of those options have been implemented, they remain under consideration. The company did not elaborate on its plans going forward, and declined to say specifically what those strategic options are at this point.

The department store chain also owes a $12 million interest payment on its bonds, which was due April 15; the 30-day grace period for that debt expires today. Analysts are still waiting to see if JCPenney makes that payment as well, according to Eric Rosenthal, a senior director at credit rating agency Fitch.

The retailer was widely reported to be nearing a bankruptcy filing, though there is also the possibility that it restructures out of court. If it does end up filing, it would follow J.Crew and Neiman Marcus as the latest casualty of the pandemic.

Like so many retailers, JCPenney is burning through cash due to government-mandated closures of nonessential businesses across the U.S. in an effort to contain the spread of Covid-19. It also has some $4 billion in long-term debt as of Nov. 2, 2019.

JCPenney did not respond to a request for comment.

Credit rating agency S&P already considered JCPenney to be in default due to missed interest payments as of April 16. The retailer was pegged as having a high probability of default and in need of a restructuring by the major credit rating agencies.

As previously noted, the company is joined by a handful of retailers considered to be at risk of a near-term default, including nutritional supplements chain GNC, musical instruments retailer Guitar Center, grocery banner The Fresh Market, apparel retailer Ascena Retail Group, fabric purveyor JoAnn Stores and department store operator Belk.

Back in late February, the department store chain lost its third chief customer officer within a five-year period, a testament to its struggles to maintain stability in key management positions.

JCPenney, which owns private label brands such as Liz Claiborne and St. John’s Bay, operates about 850 stores in the U.S. and Puerto Rico.

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