J.C. Penney, a renowned department store chain in the United States, has filed for Chapter 11 bankruptcy protection due to the severe financial strain caused by the ongoing Covid-19 pandemic and subsequent store closures. The company’s lawyer emphasized the urgent need to expedite the bankruptcy process to ensure the survival of J.C. Penney.
Although some of J.C. Penney’s 800 stores have started reopening in phases, concerns remain about the slow return of customers amidst health fears and widespread job losses. The current situation is reminiscent of the economic downturn during the Great Depression, and the lawyer representing the retailer warns that swift action is needed to avoid disastrous consequences.
In a court hearing, the lawyer outlined a timeline for the company, which includes reaching a business plan agreement with lenders by July 15 or putting the company up for sale. J.C. Penney is already planning to permanently close numerous stores in the coming weeks. It is worth noting that even without the current crisis, many retailers have struggled to reorganize under bankruptcy protection and have ultimately shut down.
U.S. Bankruptcy Judge David Jones expressed concern over J.C. Penney’s precarious position. He approved the company’s requests to continue paying employees and suppliers and urged them to surpass their own deadlines. The judge also allowed the company to utilize $500 million from its cash reserves. The virtual court hearing underscored the urgency of J.C. Penney’s situation.
With approximately 85,000 employees, J.C. Penney intends to hand over control to lenders while significantly reducing its nearly $5 billion debt. The company is contemplating a reorganization into two separate entities – one to operate the business and the other to serve as a real estate investment trust. This plan was previously reported by Reuters.
Prior to filing for Chapter 11, J.C. Penney secured $450 million in fresh financing from existing lenders. Another $450 million of current debt will be consolidated and given the same legal status as the new funding. Negotiations are ongoing with investment firms holding the company’s senior debt, including H/2 Capital Partners LLC, Sixth Street Partners, Ares Management Corp, KKR & Co, and Apollo Global Management Inc.
J.C. Penney is seeking support from lenders for its reorganization plan, which will require substantial funding. If an agreement cannot be reached, the company will pursue a sale. Talks with potential buyers are already underway. The newly appointed CEO, Jill Soltau, who joined the company in late 2018, had hoped for more time to implement her turnaround strategy. Nonetheless, discussions with creditors did not yield the desired outcome.
Critics suggesting that factors unrelated to the pandemic were responsible for J.C. Penney’s bankruptcy filing are dismissed by the company’s lawyer as completely false. It is asserted that the situation is solely a result of the coronavirus. Judge Jones emphasized the importance of swiftly resolving retail bankruptcy cases to save businesses and protect employees.
1. [Understanding Chapter 11 Bankruptcy](https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics)
2. [How Businesses Can Survive Bankruptcy](https://www.entrepreneur.com/article/52810)