J.C. Penney Co. Inc. filed for bankruptcy protection on Friday, the latest among traditional brick-and-mortar retailers to crumble as prolonged store closures due to the COVID-19 pandemic deliver the final blow to troubled businesses, Reuters reported. The U.S. department store chain, known for selling family apparel, cosmetics and jewelry at roughly 850 locations, said it reached an agreement with creditors for about $900 million of fresh financing to aid operations, while it navigates bankruptcy proceedings. The company filed for chapter 11 protection at the U.S. Bankruptcy Court for the Southern District of Texas. The bankruptcy filing caps a long decline for the 118-year-old department store chain, which once operated more than 1,600 locations that became fixtures in U.S. malls. The company at one point employed nearly 200,000 people. Even before the coronavirus outbreak, J.C. Penney was struggling with nearly $4 billion of debt and pressure from both discount retailers and e-commerce companies. Read more.
In related news, J.C. Penney Co.’s plan to slash billions of dollars in debt and emerge from bankruptcy court includes a proposal to create two new publicly traded entities, including a real estate investment trust that would hold some of the retailer’s property, Bloomberg News reported. The company’s tentative bankruptcy plan calls for creating both a new operating company and a REIT that would collect rent from a subset of J.C. Penney stores, court papers show. J.C. Penney can, with its first-lien lenders’ permission, sell up to a 35 percent stake in the new REIT to generate cash. The retailer would seek to list shares of the new operating company and the REIT on a national securities exchange “as soon as reasonably practicable” after its proposed plan takes effect, according to court documents. J.C. Penney would also try to sell its distribution centers under the plan. The proposal is “predicated on speed — it is not an option to languish in chapter 11,” Chief Financial Officer Bill Wafford said in a court declaration, adding that the retailer needs to complete a restructuring deal before the holiday shopping season. “Failure in these efforts is not an option, with nearly 85,000 associates depending on the right outcome here.” But the REIT arrangement could be abandoned. If J.C. Penney and its first-lien lenders don’t agree on a new business plan by July 14, or if the requisite funding isn’t obtained by Aug. 15, the company would instead sell all its assets unless the lenders say otherwise. Read more.
J.C. Penney also said that it received bankruptcy court approvals for motions to support its business operations, including approval for the retailer to access and use its approximately $500 million in cash collateral, Bloomberg News reported. The U.S. Bankruptcy Court for the Southern District of Texas also authorized the company to continue paying non-furloughed employees’ wages, to provide certain benefits to all employees and to pay vendors for goods and services provided after the chapter 11 bankruptcy filing on Friday. Read more.
