JC Penney Files For Chapter 11 Bankruptcy

In what may be one of the most bizarre bankruptcy filings, just hours after JCPenney stock was halted first thing in the morning when everyone was certain the company would announce it has filed its Chapter 11 petition only to read in a bizarre 8K that the company had instead made a $17 million interest payment due on its secured term loan during the 5-day grace period, the iconic retail giant (or maybe not so giant any more) and anchor mall tenant threw in the towel after all to what was a long, drawn-out and painful period of fading into irrelevance, and just after 6 pm announced it had filed for bankruptcy protection in the Southern District of Texas (docket #20-20182).

JCPenney joins a parade of retailers including Neiman Marcus, J.Crew, and Stage Stores, who have all filed for bankruptcy this month. Other chains like Gap Inc. and Nordstrom Inc. have recently raised billions of dollars in debt to ensure they have the cash to weather the crisis and reopen stores, although it is unclear if they will survive in a bitter war with off-price chains like T.J. Maxx and e-commerce giants such as Amazon.com Inc

The company, founded by James Cash Penney in 1902, which was once a favorite of middle-class suburban consumers and which operated 846 department stores in 46 states as of Feb 1, had been seeking solutions to address billions of dollars in obligations after revenue evaporated amid government-imposed lockdowns to help stem the Covid-19 pandemic. Store shutdowns since March had choked off JCP's revenue, putting even more pressure on the company’s massive debt load. After years of falling sales, red ink, and failed turnaround efforts, the coronavirus pandemic hastened a reckoning with creditors over its $3.8 billion in debt.

It failed to find a solution, and as a result, it filed a prepackaged Chapter 11 restructuring with lenders holding approximately 70% of JCPenney’s first-lien debt to reduce the Company’s outstanding debt and strengthen its financial position. From the press release:

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