US retailer JC Penney, a Plano corporation, declined to make an interest payment of $17 million due on its long term senior loan by May 7. Penney shall be given five working days until the corporation is in default, under its loan agreement. The settlement of the missed debt is possibly part of a big Penney fight.
The retailer took the decision to skip payment while it evaluates certain strategic alternatives, none of which have been implemented at this time. The retailer was scheduled to meet representatives from Sephora, a French multinational chain of personal care and beauty stores, in the district court in Sherman today. Instead, the two companies have reaffirmed their 14-year partnership to operate Sephora shops inside more than 650 Penney stores.
In a joint press release, Penney and Sephora said that they had settled their legal disputes without giving any information and committed to revisions to their existing operating agreement. At the end of the 30 days grace period, the 840 department stores chain is about to default on bonds due in 2036 worth 388 million dollars. Penney made no interest payment of $12 million on these bonds on April 15.
Most analysts in the industry expect Penney to submit bankruptcies in Chapter 11 soon. The company has a debt issue — 4 trillion dollars in debt — and stores in suburban centers that either have lost their positions or are less prospective for growth in smaller cities.