Plano, Texas — J.C. Penney Co. (NYSE: JCP) has filed for Chapter 11 bankruptcy protection in a bid to strengthen its finances through an extensive debt restructuring. The company filed on the evening of Friday, May 15 in the U.S. Bankruptcy Court for the Southern District of Texas, located in Corpus Christi.
The Plano-based retailer has secured $900 million in debtor-in-possession financing from its existing first-lien lenders that is expected to knock several billion dollars off its total debt load.
J.C. Penney, a company with a 118-year operating history, said that it would disclose in the coming weeks the number and locations of which stores would be closing. Currently, due to the coronavirus pandemic, about 40 of J.C. Penney’s approximately 850 U.S. stores are open, with another dozen or so offering curbside pickup only.
In mid-March, the retailer began furloughing workers at its supply chain and distribution centers in response to the outbreak of COVID-19. Furloughs of store associates and corporate staff followed two weeks later.
“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,” says Jill Soltau, CEO of J.C. Penney.
According to CNN Business, J.C. Penney posted $3.9 billion in losses between 2010 and 2018 as larger discount retailers and e-commerce startups ate into its market share. The company also cycled through three different CEOs during that period before Soltau took over in late 2018. The company saw its largest wave of closures in 2017, a year in which about 140 stores were shuttered.
Kirkland & Ellis LLP is serving as legal advisor to J.C. Penney during the bankruptcy proceedings. Lazard is serving as financial advisor, and AlixPartners LLP is serving as restructuring advisor.
The company’s stock price closed at just 24 cents per share Friday, May 15, before the bankruptcy announcement. As of noon Eastern Standard Time on Monday, May 18, the stock was trading at 20 cents per share. The stock price was at $1.15 per share one year ago and traded at more than $84 per share at its all-time peak in 2007. The New York Stock Exchange may delist a company after 30 consecutive days of trading below $1 per share.
— Taylor Williams