UPDATE: July 19, 2019: J.C. Penney on Friday afternoon released a statement "in light of recent reports," confirming that it is working with outside strategic advisers on its finances. "As a public company, we routinely hire external advisors to evaluate opportunities for the Company. By working with some of the best firms in the industry, we are taking positive and proactive measures, as we have done in the past, to improve our capital structure and the long-term health of our balance sheet," the statement said. "We have no significant debt maturities coming due in the near term, and we continue to maintain a strong liquidity position. Also, given our strong liquidity position we can confirm that we have not hired any advisors to prepare for an in-court restructuring or bankruptcy."
J.C. Penney is mulling debt restructuring with the help of financial advisers, Reuters reported on Thursday, citing unnamed sources.
Any move would be designed to keep the struggling department store on track in its long-running turnaround and to avoid bankruptcy, according to the report.
The department store is heaped with long-term debt of $3.8 billion and quarterly interest expenses of $73 million, as of the first quarter, and was downgraded by Moody's at the end of May.
J.C. Penney lately has seen more turnover than turnaround, despite recovery efforts that have now lasted years.
The retailer has been grappling with a challenged department store model, its own over-built footprint, its place in too many sub-par malls and a c-suite with a revolving CEO door. Most recently CEO Jill Soltau joined late last year from crafts retailer Joann after the sudden exit of Marvin Ellison. In May, in reporting the retailer's first quarter results, she emphasized the company's efforts to forge a strategic plan, reduce inventory, retool its assortment and fill out its management ranks.
At that time Penney also had $171 million in cash and $1.6 billion available through revolving credit agreements, but it clearly needs more time than what that can buy. The debt threatens to overwhelm its other challenges, according to GlobalData Retail Managing Director Neil Saunders, who called any restructuring effort "one of the last rolls of the dice" available to the retailer.
"JCP has a great many issues that need to be resolved, but the debt is an ever-present threat to the viability of the business," he told Retail Dive in an email. "It has stopped them making investments in the business and managing it has diverted attention away from day-to-day operations. Restructuring won't necessarily save JCP, but it will buy them time and allow management to develop plans to improve trading."