JCP was expected to file for bankruptcy today.

music selection:  “Stan” — Eminem

Last month, JC Penny (JCP) went into technical default on one of its bonds by not making a timely coupon payment.  Today was the last day of the grace period and the company was widely expected to file for Chapter 11 reorganization today rather than pay.  The most recent 8-K filed with the SEC notes the company made good on approximately 17 million dollars in coupon interest due.  There are no news reports of the company filing for Chapter 11.

This is fantastic news for my bond holding.  It was starting to look like I would lose substantially all of my investment of $7,439.  It now looks like management wants to make a go out of salvaging value for equity shareholders.  That increasingly means my bonds might pay out at par 1JUN2020.  I expect the company may try to negotiate a bank line of credit for the purpose of making a tender offer for the bonds.

Current price of the bond is up from low 3 cents on the dollar to about 13.25 cents on the dollar.  If I liquidated at that price, I would book a short term loss of $6,350.  I am hopeful the bond will continue to rise as the growing likelihood of the bond being money good makes it way through financial media.

ADDITIONAL UPDATE 16MAY2020 – JCP declared Chapter 11 in the hours after making the interest payment.  This makes no sense to me.  If they were going to reorganize, why not keep the interest payment for the restructuring effort?  I can only hope that management did this because they have high ethics and hope to come as close to making good on their bond obligations as possible.

Devour your prey raptors!

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Update JCP bond CUSIP 708130AD1

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One thought on “Update JCP bond CUSIP 708130AD1

  • May 19, 2020 at 6:06 pm
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    You’re right. It makes no sense. Wonder if the insiders own any debt?

    Reply

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