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J.C. Penney & Co. (NYSE:JCP): Closing price $19.35
On Monday, the retailer announced that it received a letter dated January 29th from Brown Rudnick claiming to represent holders of more than 50 percent of Penney’s 7.4 percent debentures due in 2037. The letter claims to be a notice of default under the indenture for these debentures dated April 1, 1994 between J. C. Penney Co. and U. S. Bank National Association as trustee. In a late afternoon press release, Penney’s strongly believes that “the notice of default is invalid and utterly without merit. Brown Rudnick alleges that the firm violated the indenture by entering into an inventory-secured Credit Agreement in January 2012 without providing for equal and ratable security for the debenture holders. However, the granting of a security interest in inventory pursuant to the Credit Agreement does not constitute an event of default under the indenture. Pursuant to the Indenture, the negative covenant extends only to principal property which does not include inventory.”
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