JCP stock is taking a hit and fell over 15% on a report from Reuters that JC Penney (NYSE:JCP) is in talks with advisers on debt restructuring options
Ballooning Debts
American departmental store chain JC Penney is one of the iconic department stores in the country, having existed since 1902, but the company is now on the verge of collapsing under the weight of its massive debts.
Its losses have ballooned over the past five years, and according to the latest reports, the company is now looking for options to restructure its debt. Through restructuring, the company aims to have more time to engineer a turnaround in its fortunes. Although it is true that restructuring is almost always the way to go when trying to turn a business around, it could be a risky move for JC Penney due to the debt burden it has.
The company currently has a debt burden of a staggering $4 billion, and it is supposed to repay the entire debt in four years. Considering the fact that its cash reserves are evaporating fast as well, restructuring is possibly the only way for it to survive. The company does have a revolving credit line that is worth $1.5 billion, but at the same time, it needs to be remembered that investors have sold the stock heavily over the years due to the company’s crippling losses.
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JCP stock is down over 15% and now trading at $0.92.
According to sources that are close to the developments, the company’s top brass have met with investment bankers and lawyers, who specialize in turning around ailing companies suffering from crippling debt burdens. The sources claim that JC Penney is currently weighing up two options. One of those is to raise extra cash, and if that fails, then the company could ask for its creditors to extend the debt repayment deadline. The company currently employs as many as 95,000 people and has a total of 860 stores. It goes without saying that if JC Penney does manage to get a restructuring process going, then it would have to bring about serious changes to its business.
JCP stock has been falling consistently since the beginning of this year and has corrected 50% from its February’s peak price of $1.90.
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