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JC Penney Shares Plunge to Record Low Amid Reports of Possible Chapter 11 Bankruptcy Filing

JC Penney's credit rating was cut to Caa3 by Moody's earlier this week as store closures and plummeting retail sales cripple retailers around the country.

J.C. Penney Company Inc.  (JCP) - Get J. C. Penney Company, Inc. Report shares hit a fresh all-time low Wednesday amid reports that the struggling retailer is close to filing for Chapter 11 bankruptcy protection. 

Reuters reported late Tuesday that J.C. Penney's decision to shutter all of its 850 department stores, while furloughing nearly all of its 95,000 employees, may push the retailer into a Chapter 11 filing that could help it re-finance it near $4 billion in outstanding debts. J.C. Penny officials were not immediately available for comment when contracted by TheStreet outside of regular business hours Wednesday. 

Earlier this week, Moody's Investors Service cut the Plano, Texas-based group's credit rating to Caa3, the lowest on the junk rating scale, and tagged it with a negative outlook .

“Although JCPenney liquidity is adequate, the widespread store closures as a result of the coronavirus pandemic and the continued suppression of consumer demand is expected to pressure JCPenney’s (earnings), impede its turnaround strategy and weaken its leverage to unsustainably high levels,” said Moody’s vice president Christina Boni.

J.C. Penney shares were marked 32.8% lower in early trading Wednesday to change hands at just 23 cents each, a move that would extend the stock's year-to-date decline past 85%.

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Bloomberg has also reported that the company is working with restructuring consultants Alix Partners and has held talks with lenders amid the ongoing decimation of the U.S. retail sector from the coronavirus pandemic.

The Commerce Department, in fact, reported Wednesday that March retail sales collapsed by 8.7% from last year, the biggest single-month decline since records began in 1992.

For JCPenney, however, the outbreak is especially painful, given that its turnaround plan under CEO Jil Soltau was finally starting to show signs of success after solid fourth quarter earnings in February and a 2020 forecast for same-store sales that topped Street forecasts.

However, with some 90% of the U.S. economy under lockdown, and more than 16 million Americans filing for unemployment benefits over the past four weeks alone, discretionary retailers have seen a plunge in demand that has forced the shuttering of outlets, malls and department stores around the country.