Retailer J.C. Penney said that it will skip some $12 million worth of bond payments because it's trying to stay alive, kicking off a 30-day grace period before the bonds are officially in default, according to the Wall Street Journal. JC Penny, whose bond rating has been a dismal C since Monday, said it has been in negotiations with lenders to restructure its obligations or secure financing for a potential bankruptcy filing. The company has been struggling to manage some $3.7 billion in debt amid falling sales and regular leadership shakeups. The Journal said that the company has lost money every year since 2012.

While the Federal Reserve said it will begin buying corporate debt, even risky corporate debt, this will be no help to J.C. Penney, whose credit rating falls below the criteria for the central bank's program. The Fed is only buying junk bonds rated BBB/Baa3 and above, which itself is an unprecedented move. Moody's, in an earlier report, said that speculative-grade companies with weak liquidity and refinancing profiles (i.e. companies like J.C. Penney) are dominating the recent wave of downgrades, which in turn reflects its predictions that bond defaults are likely to increase significantly. As the retailer struggles to pay its creditors, it would appear that these warnings are coming to pass, even for well-known companies.

It is unlikely that J.C. Penney will be the only company making such headlines as time goes on. Barron's noted that about $130 billion worth of high-yield, or junk, bonds, or roughly 9 percent of the market,  are scheduled to come into a maturity over the next eight quarters. What's more, these maturing bonds are mainly coming from sectors that have been hit especially hard by the global pandemic, namely transportation, oil and gas, real estate, retail, and office equipment. Since many of these firms, similarly to J.C. Penney, will be rated below the current Fed threshold for junk bond purchases, they will likely be left to twist in the wind as they find themselves unable to pay their creditors.

Goldman Sachs apparently forecasts that the junk-bond market’s default rate will peak at 13 percent this year before declining in 2021.