JC Penney Files for Chapter 11 Bankruptcy, Obtains $900 Million for Debt Restructuring
Plano, TX— JC Penney Co. (NYSE: JCP) has filed for Chapter 11 bankruptcy in an effort to strengthen its finances through a broad debt restructuring. The company filed on the evening of Friday, May 15 in U.S. Bankruptcy Court for the Southern District of Texas, located in Corpus Christi.
The Plano-based retailer secured $900 million in debtor-in-possession financing from its existing senior lenders, which is expected to reduce its total debt load by billions of dollars.
JC Penney, a company with a 118-year operating history, said it will disclose in the coming weeks the number and locations of stores that will be closing. Currently, due to the coronavirus pandemic, about 40 of JC Penney’s approximately 850 U.S. stores are open, with another dozen or so offering curbside pickup only.
In mid-March, the retailer began laying off workers from its supply chain and distribution centers in response to the COVID-19 outbreak. Furloughs for store associates and company staff followed two weeks later.
“As we concurrently worked on options to strengthen our balance sheet and expand our financial track, the closure of our stores due to the pandemic necessitated further consideration to include the elimination of outstanding debt,” says Jill Soltau, CEO of JC Penney.
According CNN Business, JC Penney posted losses of $3.9 billion between 2010 and 2018 as big discount retailers and e-commerce startups chipped away at its market share. The company also went through three different CEOs during this period before Soltau took over in late 2018. The company saw its biggest wave of closures in 2017, a year in which around 140 stores were closed.
Kirkland & Ellis LLP is JC Penney’s legal counsel during the bankruptcy proceedings. Lazard is acting as financial advisor and AlixPartners LLP as restructuring advisor.
The company’s stock price closed at just 24 cents per share on 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 $1.15 per share a year ago and traded at over $84 per share at its all-time high in 2007. The New York Stock Exchange can delist a company after 30 consecutive days trading below $1 per share.
— Taylor Williams