J.C. Penney Makes Loan Payment and Avoids Default

J.C. Penney said it made a loan payment, avoided default, and continues to evaluate "strategic alternatives, none of which have been implemented at this time."
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J.C. Penney  (JCP) - Get Report on Thursday said it made a $17 million interest payment on a loan, avoided default, and continues to evaluate strategic alternatives.

After failing to make the interest payment when it was due May 7, “the company had a grace period of five business days to make the interest payment before such non-payment would constitute an ‘event of default,’” Penney said in a Securities and Exchange Commission filing.

“The company had entered into such grace period in order to evaluate certain strategic alternatives, none of which have been implemented at this time and which continue to be considered.”

Analysts have speculated for weeks that a bankruptcy filing was coming, as a changing retail industry, the company’s miscues, and finally the coronavirus pressured the storied chain, founded by James Cash Penney Jr. in 1902.

In addition to the May 7 payment, the Plano, Texas, chain missed a $12 million interest payment on its bonds April 15. That missed payment gave the company a 30-day grace period to pursue strategic alternatives before default.

J.C. Penney has been negotiating with lenders to restructure its debts or obtain financing to continue operating in a bankruptcy process.

For the past decade department stores like J.C. Penney have been losing customers to rival chains and online retailers, particularly Amazon.  (AMZN) - Get Report

J.C. Penney, which operates 850 stores in the U.S. and Puerto Rico, is weighed down with a $3.7 billion debt burden. 

Earnings in recent years have plunged and a number of top executives and their strategies have come and gone. Revenue has dropped more than 40% since 2007.

Covid-19 closed all its stores.

J.C. Penney shares recently traded at 26 cents, up 35%. They've traded as high as 31 cents today. The stock has plunged 62% over the past three months.