J. C. Penney Company Inc. has gone bankrupt.
The struggling department store chain filed for Chapter 11 protection in federal bankruptcy court for the Southern District of Texas. According to the filing, it had $500 million in cash at hand and received debtor-in-possession financing commitments of $900 million.
The news comes on the same day that JCPenney, which had been staring down two debt payment deadlines, disclosed to the Securities and Exchange Commission that it managed to produce a $17 million payment that was due last Thursday. (It was given a one-week grace period to make the payment.) The beleaguered retailer had still owed another $12 million to bondholders that was payable on April 15.
Prior to the announcement, JCPenney’s stock was halted this morning but then shot up 28% to 25 cents as of midday trading. Following the news of its bankruptcy, its shares plunged nearly 30% after market close.
Two months ago, JCPenney tapped roughly $1.25 billion from its $2.35 billion revolving credit line. Its debt load sits at about $4 billion. A bankruptcy filing gives the company the opportunity to save money on imminent debt payments and rework some of its finances.
For several years, the Plano, Texas-based chain struggled with declining sales, numerous leadership changes and increased digital competition. Since taking the helm in October 2018, CEO Jill Soltau has shut down underperforming stores and brought on new talent to revive the business. The company also hired debt restructuring advisers in mid-July as part of its turnaround plan, as well as experimented with new strategies including tapping into the outdoor and consignment markets and launching a curbside pickup program.
However, the 118-year-old retailer’s struggles continued for several quarters. Investors had largely lost faith in the retailer, pushing its stock below $1 and putting it at risk of being delisted from the New York Stock Exchange. Then came the coronavirus pandemic: Two weeks after shuttering its 850 stores in mid-March due to government-mandated closures, JCPenney announced that it would furlough scores of workers and take additional actions to maintain its financial flexibility.
Analysts have raised concerns about protracted store closures as well as a decline in foot traffic even when the company’s locations reopen post-COVID-19. In an effort to retain its top talent to achieve certain business targets, JCPenney granted a cash award worth $4.5 million to CEO Jill Soltau, while CFO Bill Wafford, chief merchant Michelle Wlazlo and chief human resources officer Brynn Evanson each received bonuses of $1 million.
“Maintaining continuity of leadership is and will continue to be critical to the future of our company’s long-term success,” a spokesperson told FN yesterday. “Our compensation program is in line with those of other companies in similar situations and is aligned with milestone-based performance goals to continue incentivizing our team to drive results.”