J. C. Penney Company Inc. appears to have bought itself more time.
The beleaguered retailer, which has been staring down two debt payment deadlines, disclosed to the Securities and Exchange Commission today that it managed to produce a $17 million payment that was due last Thursday. (It was given a one-week grace period to make the payment.) Its stock — which was halted this morning prior to the announcement — jumped 28% to 25 cents as of midday trading.
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“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,” JCPenney said in its filing.
However, JCPenney still owes another $12 million to bondholders, payable on April 15 but also extended for 30 days. If it’s unable to make that payment, the department store chain would go into default, and its lenders could request the full sum owed before it’s due.
JCPenney is reportedly in the middle of discussions with lenders to obtain $450 million in financing ahead of a potential bankruptcy filing that could come as soon as today. The debtor-in-possession loan would initially make available $225 million to the retailer, according to a CNBC report, with the remaining accessible only after the company achieves certain business targets.
As of February, the 118-year-old company had $386 million in cash on hand — plus the roughly $1.25 billion it tapped from its $2.35 billion revolving credit line two months ago — while its debt load is about $4 billion. A bankruptcy filing would give the company the opportunity to save money on its debt payments and rework some of its finances.
JCPenney’s struggles have persisted for several quarters. Investors had largely lost faith in the retailer, pushing its stock below $1 and putting it at risk of being delisted from the New York Stock Exchange. Then came the coronavirus pandemic: Two weeks after shuttering its 850 stores in mid-March due to government-mandated closures, JCPenney announced that it would furlough scores of workers and take additional actions to maintain its financial flexibility.
Analysts have raised concerns about protracted store closures as well as a decline in foot traffic even when the company’s locations reopen post-COVID-19. In an effort to retain its top talent and achieve certain business targets, JCPenney this week granted a cash award worth $4.5 million to CEO Jill Soltau, while CFO Bill Wafford, chief merchant Michelle Wlazlo and chief human resources officer Brynn Evanson each received bonuses of $1 million.