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Bankrupt JCPenney Has Reopened Nearly All Its Stores — and Cash Flow Is Better Than Expected

As it approaches a deadline in its Chapter 11 case, J. C. Penney Company Inc. appears to be on track.

In a hearing held in Texas bankruptcy court Wednesday, the retailer said it has been able to reopen 831 of its roughly 850 units after being forced to close all doors in mid-March. What’s more, JCPenney said revenues from the reopened stores had so far exceeded expectations — and that it had roughly $980 million in cash on hand at the end of June, besting its projected budget by about $100 million.

“[JCPenney has] been able to open some of their higher-performing stores more recently. With those higher-performing stores, the revenues have been better. We think that’s a positive, and we think it will continue to trend in the right direction,” said JCPenney attorney Joshua Sussberg, of Kirkland & Ellis LLP.

At the same time, an upward trend in COVID-19 cases in many U.S. states has caused uncertainty regarding potential re-closings.

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“The company is considering, and weighing very importantly, what it means to ensure that this plan, to the extent we can move forward and have support from its lenders, is viable,” said Sussberg.

JCPenney is approaching a July 8 deadline to submit its business plan, which must be approved by lenders by July 15. When it filed for Chapter 11 protection in May, JCPenney planned to separate its real estate and operating business into two separate companies, in a so-called “prop co/op co” structure. Through this split, the “prop co” would be a public real estate investment trust owned by first-lien lenders; JCPenney is exploring the sale of the entire business to a score of potential investors.

JCPenney must decide by July 8 if it will make a second draw on in debtor-in-possession financing. The company received court approval for a $900 million DIP package in June, including $450 million in new money. If it separates the real estate business, the retailer will be able to draw down the full $225 million in remaining DIP funds. If it chooses to sell its entire business, JCPenney will be able to draw down $50 million of the remaining funds.

The retailer had previously announced plans to exit 154 of its roughly 850 stores this summer; closures are currently underway at over 130 outposts, with more doors to be closed in phases. By February 2021, JCPenney said in May, it expects to exit 242 of its units, leaving it with a fleet of about 600 stores.

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