Report: J.C. Penney to Prep for Debt Talks Ahead of Holiday Season

PLANO, United States — J.C. Penney Co. is preparing for talks with its creditors on possible transactions to ease its debt burden and give the company's new chief executive more breathing room ahead of the critical holiday season.

Advisers for the department-store chain and some of its bondholders are close to signing non-disclosure agreements, and expect to do so by the end of September, according to people with knowledge of the matter. Those agreements would allow advisers for groups of first-lien, second-lien and unsecured bondholders access to confidential company information, the people said, who asked not to be identified discussing private negotiations.

“As a matter of policy, we do not comment on discussions with creditors and other partners,” Sarah Holland, a representative for Plano, Texas-based J.C. Penney, said in an email.

Bondholders for the 117-year-old retailer have been pushing for the company to consider a swap or extension on some of its $4 billion of debt ahead of the maturities, in an effort to avoid the last-minute brinkmanship that contributed to the bankruptcies of Toys “R” Us Inc., Sears Holdings Corp. and Barneys New York Inc. A bankruptcy filing isn’t currently a focus of the anticipated debt talks, the people said.

Default Bets

Chief Executive Jill Soltau has been under pressure to turn around the struggling retailer since assuming her position last October. Soltau has shuttered stores, exited the major appliance business, and is focusing on improving the consumer in-store and online retail experience.

J.C. Penney has been working with restructuring advisers from law firm Kirkland & Ellis LLP and investment bank Lazard Ltd. to explore opportunities to improve its balance sheet. A group of first-lien creditors is working with White & Case LLP and Houlihan Lokey Inc., while second-lien creditors are being advised by Stroock & Stroock & Lavan LLP and Evercore Inc., the people said. A group of unsecured creditors are getting advice from GLC Advisors & Co.

Representatives for the advisory firms either declined to comment or didn’t immediately comment.

The cost to protect J.C. Penney’s debt against a near-term default has declined dramatically in recent weeks. On Wednesday, it cost $233,000 to insure $10 million of debt against default for six months, down from as high as $1.9 million in early August.

By Allison McNeely and Claire Boston, with assistance from Jordyn Holman; editors: Rick Green and Nicole Bullock.