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J.C. Penney Says Bondholder Counsel Withdraws Default Notice

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March 20 (Bloomberg) -- J.C. Penney Co., which last week asked a Delaware judge to schedule a trial in April over its dispute with bondholders threatening to declare the company in technical default, said today it received a letter from holders’ lawyers withdrawing and rescinding the default.

J.C. Penney sued bondholders Feb. 4 after lawyers claiming to represent holders of more than 50 percent of its 7.4 percent notes due in 2037 accused the company of defaulting by signing a credit agreement in January 2012 without providing proper security for investors. Bondholders set a May 5 deadline to remedy the alleged default, J.C. Penney said in its complaint.

The company said in a filing last month in Delaware Chancery Court that the improper default claims could put the company at risk of demands for payment on more than $2.8 billion in debt. The company’s credit ratings have been slashed in the past year as Chief Executive Officer Ron Johnson’s turnaround plan struggles to take hold.

J.C. Penney has $325.6 million of the 7.4 percent notes outstanding, according to data compiled by Bloomberg. The debt traded March 19 at 81 cents on the dollar to yield 9.408 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

The case is J.C. Penney Co. Inc. v. US Bank National Association as Indenture Trustee, 8276, Delaware Chancery Court (Wilmington).

To contact the reporter on this story: Dawn McCarty in Wilmington at dmccarty@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net