JC Penney Falls After Report Of Debt Restructuring Initiatives

Shares J C Penney Company Inc JCP fell Friday morning after Reuters reported the struggling department store may have hired debt restructuring experts.

What Happened

JC Penney tasked experts to explore options that would give the company more time to oversee a turnaround in the face of $4 billion of debt which needs to be addressed in the coming years, sources told Reuters. The company has more than $1.5 billion in available capital from its revolving credit line, but this figure isn't large enough to ease investor concerns. Most notably, the company's credit rating is classified as junk.

Why It's Important

JC Penney's loss from 2014 through the first quarter 2019 totaled $1.7 billion. During that time period, the company named Marvin Ellison as CEO and then introduced appliances to sales floor. The company took a new direction in 2019 under new CEO Jill Soltau by removing appliances as part of a return to its roots as selling mid-tiered apparel targeted at families.

Management has a turnaround plan on the table, source told Reuters, but remains in early stages so JC Penney needs help in avoiding a potential bankruptcy filing. Based on the stock's decline from the $10 level to below $1 Friday morning, investors are likely unconvinced the company will succeed in a turnaround initiative over the coming years.

The stock traded at 98 cents per share at time of publication.

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Photo credit: Miosotis Jade (Own work), via Wikimedia Commons