Photo: J.C. Penney
J.C. Penney entered bankruptcy proceedings with a sense of urgency, setting a deadline of July 15 to secure support from lenders on a reorganization plan or pivot to pursuit of a sale to avoid liquidation.
The bankruptcy was expected as the 118-year-old department store skipped two interest payments in recent weeks. CNBC earlier reported that Penney plans to close 180 to 200 of its 846 stores.
Some 70 percent of Penney’s lenders have agreed to support a restructuring proposal that would reduce “several billion dollars in indebtedness.”
Penney said discussions on a debt restructuring had been ongoing prior to the pandemic. Said CFO Bill Wafford in a court filing, “Unfortunately, once COVID-19 was declared a pandemic, and the company’s primary revenue stream in-store sales evaporated overnight, talks regarding the potential transactions came to a grinding halt.”
Plans also call to split the company into two separate publicly traded entities, one being a real estate investment trust. Penney has “significant unencumbered real property” worth up to $1.4 billion, according to the retailer’s lawyers.
Otherwise, Penney’s turnaround efforts under Jill Soltau, Penney’s CEO since October 2018, are progressing and will continue. Management has shifted focus back to core categories such as women's apparel and accessories along with an emphasis on customer service and low prices. The most ambitious effort is a remodel in Hurst, TX that features a more open layout, with a fitness studio, video game lounge and style classes.
“Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy — and our efforts had already begun to pay off,” said Ms. Soltau in a statement. “While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.”
According to court documents, if two-thirds of its bankruptcy lenders don’t consent to an “acceptable business plan” by July 15, Penney must “immediately cease pursuing the plan” and instead pursue a sale of assets.
- JCPenney to Reduce Debt and Strengthen Financial Position Through Restructuring Support Agreement – J.C. Penney Company, Inc.
- J.C. Penney, 118-Year-Old Department Store, Files for Bankruptcy – The New York Times
- J.C. Penney store closings coming: Retailer trying to avoid liquidation in Chapter 11 bankruptcy – USA Today
- J.C. Penney Needs Quick Bankruptcy Exit to Avoid ‘Disastrous’ Result – The Wall Street Journal
- JC Penney’s future depends on what happens over the next two months – CNBC
- J.C. Penney Bankruptcy May Not Buy Enough Time – Bloomberg/The Washington Post
- Can J.C. Penney make it without Sephora? – RetailWire
- What will it take to fix J.C. Penney’s shrinking sales problem? – RetailWire