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Law360 (April 15, 2020, 8:15 PM EDT) -- J.C. Penney Co. reported Wednesday that it would not make a scheduled $12 million interest payment on certain secured notes, a move that could put it on the path to a potential bankruptcy filing.
In a filing with the U.S. Securities and Exchange Commission, J.C. Penney said that it "has elected to enter into the 30-day grace period with respect to the interest payment in order to evaluate certain strategic alternatives, none of which have been implemented at this time."
The payment, due Wednesday, is on senior debt that has indenture provisions permitting the 30-day grace period before "such non-payment constitutes an 'event of default,'" the filing said.
In a statement sent to Law360 on Wednesday, the company said that like other retailers, it has been left financially reeling because of store closures caused by the coronavirus crisis.
"As a result of the pandemic, JCPenney made the strategic decision to not make an interest payment due on April 15th and take advantage of the 30-day grace period to continue ongoing discussions with lenders and maximize financial flexibility," the statement said. "JCPenney has been engaged in discussions with its lenders since mid-2019 to evaluate options to strengthen its balance sheet, a process that has become even more important as our stores have also closed due to the pandemic."
The statement said the company had seen sales improvement in several merchandise divisions in recent months and is looking forward to when it can reopen its stores.
Wednesday's SEC filing came just weeks after the struggling retailer announced it had made "the difficult decision" to furlough employees amid the COVID-19 outbreak. J.C. Penney announced March 18 that it would temporarily close its stores during the public health crisis.
On March 31, J.C. Penney said its stores would remain closed and that it would "continue to follow guidance from local, state, and federal officials as it anticipates gradually reopening stores and offices in markets when it is safe to do so."
In that statement, the company also said it "made the difficult decision to temporarily furlough the majority of store hourly associates, beginning April 2" and furlough some employees in its corporate offices.
Additionally, the retailer said it had "taken several actions to improve its cash position and financial flexibility during the pandemic, including deferring capital spend, utilizing funds available under the revolving credit facility, pausing hiring, cutting spending, reducing receipts, and extending the terms for payment of goods and services."
The company also said it had suspended 2020 merit increases and was "evaluating other financial options."
--Editing by Abbie Sarfo.
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