J. C. Penney Company Inc. is looking to buy more time.
The bankrupt retailer submitted its business plan to lenders on Wednesday, meeting its deadline. But JCPenney now is asking Texas bankruptcy court to grant more time for negotiations. If an extension is not granted, lenders will be expected to approve the plan — which isn’t public but has been shared with creditors, lenders and prospective investors — by July 15.
“We’re going to need more time. Our conversations have been incredibly productive,” said JCPenney attorney Joshua Sussberg of Kirkland & Ellis at a hearing on Wednesday. “We believe we will come to an agreement and solution and avoid the outcome no one wants.”
When it filed for Chapter 11 protection in May, JCPenney revealed plans 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 also exploring the sale of the entire business to a score of potential investors.
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Despite receiving permission to delay rent payments through July 13, JCPenney has started making payments for June and July, according to Sussberg. The retailer had previously announced plans to exit 154 of its roughly 850 stores this summer; closures are currently underway at over 130 outposts.
The struggling department store chain filed for Chapter 11 protection on May 15 after weeks of speculation. JCPenney had for several years been challenged by declining sales, numerous leadership changes and increased digital competition. In July 2019, the company had hired restructuring advisers 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.
Nevertheless, 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. The company was then further challenged by the coronavirus crisis, which forced it to temporarily shutter its entire fleet of approximately 850 units. With doors shut, JCPenney furloughed scores of workers and took other actions in hopes of maintaining its financial flexibility, including tapping roughly $1.25 billion from its $2.35 billion revolving credit line. At the end of June, the retailer had about $980 million in cash on hand, besting its projected budget by around $100 million.