With debts shooting up and sales slumping, JCPenney Co. Inc. has hired advisers to explore debt restructuring options.
Doing so, the American department store chain believes that it would get more time to shape a turnaround.
The move is considered as a high-stake attempt for JCPenney to put its house in order before debt (totaling roughly US $ 4 billion) catches up in next few years.
It is also worth noting here that despite increase in US shoppers’ spending, the firm’s stock is down by over 50 per cent and is trading marginally above US $ 1.
Quite worrying indeed as it gives a market capitalisation of US $ 342 million, which is nowhere near enough to clear the company’s debt.
While JCPenney has more than US $ 1.5 billion available under a revolving credit line, investors have continued to sell off their shares in response to financial losses.
Adding to the stiff competition from other big discount retailers, JCPenney has also been struggling to enhance the profile of its online business to rival biggies like Amazon.com.
Lately, the firm has been holding discussions with lawyers and investment bankers who specialise in advising troubled companies on debt restructuring and other financial workouts, in addition to exploring options that could include raising additional cash or negotiating with creditors to push out debt maturities.
In May, the retailer said sales at stores, open for at least a year, slumped more than expected during Q1 and that its net loss nearly doubled to US $ 154 million.
