Penney is in discussions with existing lenders including Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. for a so-called debtor-in-possession loan that would keep the department-store chain's operations funded during a court-supervised bankruptcy, according to people familiar with the matter.
The loan package could total roughly $800 million to $1 billion, with some of that money potentially including existing debt. The facility would likely be syndicated so that other lenders could participate, the people said, with one cautioning the amount could change.
A bankruptcy filing could take place within the next few weeks, the people said. The company entered into a 30-day grace period after missing an interest payment due to bondholders on April 15. It is possible creditors enter into a forbearance agreement if the company needs additional time to iron out negotiations before filing.
Along with Sears, J.C. Penney was one of the dominant department-store chains of the last century. But the 118-year-old company has been losing money for years. With its mall-based stores closed and unlikely to reopen any time soon, the company has been forced to put aside its latest turnaround strategy and face its creditors at the negotiating table.
Department stores were struggling before the pandemic forced the closure of most U.S. stores. Sears Holdings Corp. filed for bankruptcy in 2018 and has continued to close stores and sell assets since leaving court protection. Macy's Inc. plans to close 125 locations over the next three years. Kohl's Corp.'s sales fell for the most recent fiscal year, which ended Feb. 1. Neiman Marcus Group Inc. is planning to file for bankruptcy any day, according to people familiar with the matter.
Retailers are far from alone in seeing their businesses walloped by the pandemic and the collapse of business activity. Energy companies have been pummeled in recent weeks by the combination of a market downturn and plummeting oil prices, leading several to seek restructuring advice or bankruptcy protection. A total of seven U.S. oil-and-gas drillers filed for bankruptcy in the first quarter of 2020, and more are expected to do so.
Should the near-total shutdown of business forced by the coronavirus continue for much longer, companies in other industries are expected to follow suit.