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Why J.C. Penney Shares Were Rising Today

By Jeremy Bowman – Sep 20, 2019 at 1:37PM

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Shares of the department-store chain climbed on news about potential debt talks.

What happened

Shares of J.C. Penney (JCPN.Q) were surging Friday on news that the department-store chain was planning to hold talks with creditors ahead of the holiday season. The market unsurprisingly saw the move as a positive, as it gives the company the opportunity to get some relief from its debt burden of more than $4 billion.

The stock was up 14.9% as of 12:38 p.m. EDT.

The entrance to a JCPenney department store

Image source: J.C. Penney.

So what

According to a report by Bloomberg, the retailer and some of its debtholders are close to signing nondisclosure agreements, a preliminary step to holding talks that could allow the company to refinance some of its debt, or to ease the burden in a different way. Those agreements would allow creditors to see confidential company information that could help inform any renegotiation of J.C. Penney's debt load.

Lenders have been pressuring the company to look into alternatives for its upcoming debt maturities, to avoid the last-minute negotiations that helped push peers like Sears Holdings and Toys R Us into bankruptcy.

Now what

Investors are clearly happy to see any chance of a turnaround: The stock jumped earlier in the month on news that the company was rolling out a brand of outdoor men's apparel and launching 100 outdoor shops in its department stores, seeking to capitalize on the athleisure fashion trend.

This holiday season will be CEO Jill Soltau's biggest opportunity yet to get J.C. Penney back on track since she took the helm at the retailer last October. She has tried to refocus the company on apparel, its biggest business segment, and to spruce up stores to make them more attractive to shoppers.

Today's news is just a preliminary step toward potentially easing J.C. Penney's debt burden, but the stock has fallen so low that any piece of good news will send it soaring. Expect shares to continue to be volatile through the holidays.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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