Gap said it did not pay rent on North America stores that were closed in April and may not have enough cash flow to sufficiently fund operations.

In a securities filing, the retailer said it is looking for ways to find liquidity over the next 12 months, including taking on new debt, cutting jobs, and extending payment terms for its creditors.

“We expect the Covid-19 pandemic to have a material adverse impact on our business and financial performance,” the company said in its filing. “The extent of the impact … will depend on future developments, including the duration and severity of the pandemic, which are uncertain and cannot be predicted.”

S&P Global Ratings downgraded the company to BB- on the “Covid-19 related challenges.”

Gap said it expects to have $750 million to $850 million in cash and cash equivalents by the close of its fiscal quarter ending May 2. It stopped paying rent on the closed stores at the beginning of the month and is negotiating with landlords on deferrals or abatements. The company said it will be terminating leases and permanently closing some stores.

“If we are unable to renegotiate the leases and continue to suspend rent payments, the landlords under a majority of the leases for our stores in the United States could allege that we are in default under the leases and attempt to terminate our lease and accelerate our future rents due,” Gap said.

“Although we believe that strong legal grounds exist to support our claim that we are not obligated to pay rent for the stores that have been closed … there can be no assurance that such arguments will succeed.”

Rent payments on the stores amount to about $115 million in monthly expenses.

S&P said it expects Gap’s results to be “stressed” over the near term as demand for apparel remains depressed.

S&P believes this period of disruption will result in permanent sales losses as seasonal apparel purchases are highly discretionary and not deferred.

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