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JC Penney refuses to make another big interest payment
08 May '20
2 min read
Pic: JC Penney
Plano-based US retailer JC Penney recently said it will not make a $17-million interest payment that was due by May 7 on its senior secured term loan. Penney has a grace period of five business days under its loan agreement to make the payment before the company is in default. The skipped debt payment is reportedly part of a bigger battle for Penney.
The retailer took the decision to skip the payment while it evaluates “certain strategic alternatives, none of which have been implemented at this time, it said in a filing.
The retailer was scheduled to meet representatives from Sephora, a French multinational chain of personal care and beauty stores, in the district court in Sherman today. Instead, the two companies said they have reaffirmed their 14-year partnership to operate Sephora shops inside more than 650 Penney stores, according to US media reports.
Penney and Sephora said in a joint press release that they resolved their legal matters and have ‘agreed to mutually beneficial revisions’ to their joint operating agreement without providing any details.
The chain of 840 department stores is approaching the end of a 30-day grace period before it’s in default on $388 million in bonds due in 2036. On April 15, Penney didn’t make a $12 million interest payment on those bonds.
Most industry analysts expect Penney to file for Chapter 11 bankruptcy soon. The company has both a debt issue — $4 billion in long-term debt — and stores in malls that have either lost their positions in suburban markets or are in smaller cities with less potential for growth.
The retailer took the decision to skip the payment while it evaluates “certain strategic alternatives, none of which have been implemented at this time, it said in a filing.
The retailer was scheduled to meet representatives from Sephora, a French multinational chain of personal care and beauty stores, in the district court in Sherman today. Instead, the two companies said they have reaffirmed their 14-year partnership to operate Sephora shops inside more than 650 Penney stores, according to US media reports.
Penney and Sephora said in a joint press release that they resolved their legal matters and have ‘agreed to mutually beneficial revisions’ to their joint operating agreement without providing any details.
The chain of 840 department stores is approaching the end of a 30-day grace period before it’s in default on $388 million in bonds due in 2036. On April 15, Penney didn’t make a $12 million interest payment on those bonds.
Most industry analysts expect Penney to file for Chapter 11 bankruptcy soon. The company has both a debt issue — $4 billion in long-term debt — and stores in malls that have either lost their positions in suburban markets or are in smaller cities with less potential for growth.
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