JCPenney's Bankruptcy Nightmare

JCPenney's Bankruptcy Nightmare

almost 4 years ago2 mins

Something was lurking in JCPenney’s storm drain late last week: the department store chain is in talks with lenders about funding its looming bankruptcy. Take it, JC Penney. Take it 🤡

What does this mean?

The long-suffering American retailer has been struggling with the rise of ecommerce and fast fashion for years, and was on shaky ground even before the coronavirus pandemic temporarily forced it to shut its 859 stores. But now JCPenney is talking to its existing banks, as well as potential new ones, about borrowing up to $1 billion. That loan would help the company to keep operating throughout “Chapter 11” bankruptcy proceedings – and hopefully, enable it to repay its debts after restructuring.

JCPenney's stock has been falling for years
JCPenney's stock has been falling for years

Similar rumblings were heard across the pond from airline Lufthansa, which has grounded 95% of its flights and admitted earlier this month that it was burning through around $1 million every hour 🛬 The German flag carrier followed up late last week with a warning that even if it borrowed more money, it’d run out of cash in weeks unless European governments stepped in to offer support.

Why should I care?

Over a decade ago, the US government bailed out its finance industry during the global financial crisis in what it said was a one-off. But faced with another crisis, it’s already agreed to bail out airlines – arguing that the pandemic wasn’t their fault 🤷‍♀️ – and is now considering rescuing other industries too, including oil companies. Some analysts reckon other countries will follow with wholesale corporate bailouts of their own soon enough. So much for “one-off”…

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One company that’s unlikely to need a bailout anytime soon is sports betting firm DraftKings, which on Friday merged with an already publicly listed specialist company so its shares would be listed on the stock exchange. The lack of live sports is hurting the company, sure, but the rapid growth of esports might give it something to cheer about.

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