Retailers J.C. Penney Co. Inc. and Neiman Marcus Group both skipped debt payments this week as the COVID-19 pandemic ravages retailers and reports that both are possibly in bankruptcy talks, according to multiple reports.
Neiman Marcus skipped a debt payment due this week at a time when the luxury retailer has shuttered stores temporary, both Reuters and the Wall Street Journal reported.
Neiman Marcus’s decision to skip the payment has put it in default on the obligation, according to a letter sent to the retailer from a bondholder owed the money, Marble Ridge Capital LP, Reuters reported.
The Dallas-based company has made bankruptcy preparations that includes talks with creditors on financing to aid operations during court proceedings, Reuters previously reported. Neiman is under more than $4 billion of debt taken as part of a private equity takeover in 2013.
Most debt obligations have grace periods during which borrowers can still make payments, buying more time for bankruptcy preparations, a source familiar with the matter told Reuters.
The skipped payments comes at a time where many U.S. retailers are struggling due to the impact of the coronavirus pandemic, which include potential buyers staying at home amid shelter-in-place orders in major cities across the country. On Wednesday, JCPenney skipped a $12 million interest payment, a regulatory filing shows.
The Plano-based retailer has a 30-day grace period before the payment is in default. The company’s $12 million interest payment is on senior notes that are due in 2036 that carry a 6.375 percent interest rate.
The company decided to enter the grace period with the interest payment “in order to evaluate certain strategic alternatives, none of which have been implemented at this time,” it said in the filing.
JCPenney is also exploring filing for bankruptcy after the COVID-19 pandemic upended its turnaround plans, according to a report from Reuters.
The retailer has enough cash to survive the coming months, sources told Reuters, but JCPenney is considering filing as a way to rework its “unsustainable” finances and save money on looming debt payments.
Sources said concerns about prolonged closures of its 850 stores and a potentially dwindling customer base even when stores reopen have factored into the bankruptcy discussions.
On March 31, JCPenney announced it would furlough the majority of its hourly store associates and extend the temporary closure of its stores and business offices because of the coronavirus.
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