J.C. Penney (NYSE:JCP) pulled a head fake with investors this morning after trading of the retailer's stock was halted so it could report some news.
Although everyone expected the troubled department store was going to declare bankruptcy, it instead said it had made the interest payment due on its term loan credit facility. When trading on J.C. Penney stock resumed, it soared 27%.
The retailer was supposed to make a $17 million interest payment on May 7 under its senior secured term loan credit facility, and when it missed the payment, it was largely assumed the default was in advance of J.C. Penney preparing a bankruptcy filing.
However, the retailer had five business days to make the payment before it would constitute an "event of default" under terms of the loan, and J.C. Penney said it paid the amount due on May 14, the last day permissible.
That doesn't mean the department store chain isn't still on deathwatch. Although unlike many other retailers whose finances are in much better shape, J.C. Penney has paid its rent and now is making its interest payments, the COVID-19 pandemic may finish the job the retail apocalypse started.
Even with the interest payment made, a bankruptcy filing is still possible, if not probable, as the retailer has reportedly been trying to secure financing for a restructuring while under court protection. It was also doling out bonuses to its executives to ensure they stayed around. This may all just be a part of getting its ducks in a row before the end finally comes.