J.C. Penney (NYSE:JCP) was expected to be the first retailer to declare bankruptcy due to the coronavirus lockdown, but was beaten to the punch by J.Crew and Neiman Marcus.
Yet it looks as though the once-venerable department store will succumb at last as the retailer is reportedly seeking a $450 million debtor-in-possession financing deal ahead of a Friday bankruptcy filing.
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One chance for restructuring
CNBC reports J.C. Penney is talking with lenders to give it access to half of the money up front, and the second half after it hits certain milestones.
Splitting the funding into tranches -- the total of which is less than half the $1 billion the retailer was originally seeking -- offers the lenders a measure of protection in the event consumers don't return to stores this summer, or another wave of coronavirus infections necessitates a new lockdown.
According to the report, J.C. Penney is also looking to close as many as 200 of its near-850 store portfolio.
The industry was already on shaky ground as the retail apocalypse saw a record 9,000 stores close last year, and it was anticipated the attrition could continue for another two years.
The pandemic, however, has hastened the demise of companies that otherwise might have been able to survive. Those businesses deemed essential were given a material competitive advantage over those deemed non-essential. Where Walmart (NYSE:WMT) was allowed to remain open and sell all manner of merchandise, including apparel, retailers like J.C. Penney were forced to close.
Although Walmart has sold decidedly more food than clothes, the inability of financially strapped retailers like J.C. Penney to sell anything at all ensured their end. Of course, the retailer's deal has not been finalized and may still not happen.
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