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S&P downgrades J.C. Penney on potential debt restructuring

S&P Global Ratings on Aug. 28 lowered the ratings of J. C. Penney Co. Inc. to CCC from CCC+ over risks that the U.S. department store chain may pursue a restructuring of its debt over the next 12 months.

The rating agency said the retailer could proceed with a possible debt restructuring due to its unsustainable capital structure, its insufficient business improvement initiatives, weak same-store sales and industry headwinds. It highlighted the recent release of the company's second-quarter results which, it said, "demonstrated continuing revenue declines."

J.C. Penny saw sales slide 7.4% in the second quarter to $2.62 billion from $2.83 billion.

Ratings also cited its expectation for an increasingly difficult macroeconomic environment and a highly competitive department store sector.

However, the agency said J.C. Penney's near-term maturities are manageable as it has about $150 million of senior notes maturing between 2019 and 2020.

Ratings said it could further lower the company's ratings if it announces a debt exchange or restructuring or if its operating conditions worsen.

The agency said it will only raise the ratings if J.C. Penney demonstrates a significant and sustained improvement in its performance.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.