The company is readying itself to file for bankruptcy as soon as next week, knowledgeable sources told Reuters. They said the company intends to shutter about 25% of its 850 stores.
The news didn’t help J.C. Penney shares Friday. At last check, they fell 4.01% to 18.03 cents and have cratered 75% over the last three months.
J.C. Penney has skipped two debt payments in the last month, and analysts expect it to file for bankruptcy in coming days when the grace periods end.
The company is in talks with investment firms KKR, Ares Management, Sixth Street Partners and Apollo Global Management for a deal in which they would take on some of the company’s debt in exchange for a controlling equity stake, knowledgeable sources told Bloomberg.
That would be part of a Chapter 11 bankruptcy filing, perhaps next week, they said. The lenders might provide as much as $500 million in financing for J.C. Penney, so it could continue to operate during bankruptcy proceedings.
H/2 Capital Partners also is talking to the company, apart from the other group, about a restructuring plan, the sources said.
J.C. Penney would become the third major retailer to go bankrupt amid the coronavirus pandemic, following J.Crew and Neiman Marcus.
Penney has suffered from a turnstile of business plans and top executives in recent years. The shift to online retail purchases also has weighed heavily on the company.
The pandemic appears to have driven the final nail in Penney’s coffin, closing stores and keeping would-be shoppers at home.
The company is negotiating with creditors for a debtor-in-possession loan to keep it afloat while it winds through the bankruptcy process, the Reuters sources said. Some of them said Penney may get a loan of $400 million to $500 million.