Restructuring Information
General FAQ
- JCPenney has entered into a Restructuring Support Agreement (“RSA”) with first lien lenders holding approximately 70% of JCPenney’s first lien debt to reduce the Company’s outstanding indebtedness and strengthen its financial position.
- The RSA is expected to reduce several billion dollars of indebtedness, provide increased financial flexibility to help the Company navigate through the Coronavirus (COVID-19) pandemic, and better position JCPenney for the long-term.
- We believe the RSA and the widespread support we have received from our asset-based lenders and first lien lenders will allow us to pursue a financial restructuring on an expedited timeframe.
- To implement the agreed upon terms of the financial restructuring plan, JCPenney voluntarily filed petitions under Chapter 11 of the United States Bankruptcy Code in the Southern District of Texas, in Corpus Christi, TX (the "Court").
- During this process, JCPenney will continue to be one of the nation’s largest apparel and home retailers with an expansive footprint of hundreds of stores across the U.S. and Puerto Rico and a powerful eCommerce flagship store, jcp.com.
- The Company has reopened nearly 500 stores across the country and looks forward to continue reopening stores and offices in a phased approach while following guidance from local and state orders.
- Implementing this financial restructuring plan through a Court-supervised process is the best path to ensure that JCPenney will build on its over 100-year history to serve our customers for decades to come.
- Due to the Coronavirus (COVID-19) pandemic, the American retail industry has experienced a profoundly different new reality, requiring the Company to make difficult decisions in running our business to protect the safety of associates and customers and the future of the Company.
- Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off.
- While we had been working in parallel on options to strengthen our balance sheet and extend our financial runway, the closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.
- We are undertaking a proactive and strategic process with the support of our first lien lenders in order to significantly improve our capital structure – without any expected interruption to our valued customers.
- By implementing this financial restructuring plan, we will accelerate our store optimization strategy and increase our financial flexibility to help us navigate through the Coronavirus (COVID-19) pandemic and better position JCPenney for the long-term.
- Chapter 11 is a section of the U.S. Bankruptcy Code that allows companies to reorganize their finances through a court-supervised proceeding while continuing to operate their businesses.
- Chapter 11 permits, and even encourages, daily business operations to continue as usual.
- In Chapter 11, we expect to be able to support our operations, including to pay active associate wages, provide certain benefits to all associates, and to pay vendor partners in the ordinary course for all goods and services provided on or after the Chapter 11 filing date.
- The RSA is expected to reduce several billion dollars of indebtedness, provide increased financial flexibility to help the Company navigate through the Coronavirus (COVID-19) pandemic, and better position JCPenney for the long-term.
- To implement the RSA and the pre-arranged plan, JCPenney filed for Chapter 11.
Considering the progress that was being made on the Company’s transformation strategy, why does JCPenney need to file for Chapter 11?
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- Due to the Coronavirus (COVID-19) pandemic, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company.
- The closure of our stores due to the pandemic necessitated a more fulsome review to include the elimination of outstanding debt.
- This process will accelerate our store optimization strategy and increase our financial flexibility to help us navigate through the pandemic and better position JCPenney for the long-term.
- We are encouraged by the level of support we have received from our vendor partners, landlords, and other stakeholders, whose confidence in our business and our people is expected to contribute to a successful financial restructuring.
- The Company remains focused on its Plan for Renewal and returning JCPenney to sustainable, profitable growth.
- A pre-arranged plan means that JCPenney has received widespread support from its first lien lenders prior to initiating the Chapter 11 process.
- In our case, we initiated the Court-supervised process to implement our RSA with the support of approximately 70% of our first lien lenders.
- Many companies enter the Court-supervised process with no defined path forward – and those companies leave the discussions with lenders for later in the process.
- What we’re announcing is that we are using the Court-supervised process to implement the agreement we have reached. And the RSA demonstrates the confidence our first lien lenders have in our business.
- We believe the RSA and the widespread support we have received from our asset-based lenders and first lien lenders will allow us to pursue a financial restructuring on an expedited timeframe.
What is DIP financing? Please explain how the Chapter 11 filing gives the Company access to new financing. Where does that money come from?
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- Debtor-in-possession (“DIP”) financing is a specialized type of financing designed to fund the operating needs of companies that are undergoing a court-supervised restructuring.
- In addition to approximately $500 million of cash on hand that we were already authorized to use, we have received authorization to access our DIP financing committed by our existing first lien lenders, which includes $450 million of new money.
- Under the terms of the DIP agreement, JCPenney has access to up to $225 million immediately, and will have access to an additional $225 million as needed after July 15, 2020, subject to certain conditions.
- This financing, combined with cash flow generated by the Company’s ongoing operations, is expected to be sufficient to meet our operational and restructuring needs.
- As part of the DIP commitment from its existing lenders, JCPenney will explore additional opportunities to maximize value, including a third-party sale process.
- No. During this process, JCPenney will continue to be one of the nation’s largest apparel and home retailers with an expansive footprint of hundreds of stores across the U.S. and Puerto Rico and a powerful eCommerce flagship store, jcp.com.
- Chapter 11 is a section of the U.S. Bankruptcy Code that allows companies to restructure their finances through a court-supervised proceeding while continuing to operate their businesses. Chapter 11 permits, and even encourages, daily business operations to continue as usual.
- JCPenney is welcoming customers back to select stores and continuing to offer its Contact-free curbside pickup service at all open stores.
- As part of our ongoing transformation, we will reduce our store footprint to better align our business with the current operating environment and drive sustainable, profitable growth, as we focus resources on our strongest stores and powerful eCommerce flagship store, jcp.com.
- Following a comprehensive evaluation of our retail footprint and a careful analysis of store performance and future strategic fit for the Company, JCPenney identified the first phase of 154 store closures.
- Following the entry of an Order at the June 11, 2020 hearing with the U.S. Bankruptcy Court for the Southern District of Texas, in Corpus Christi, TX, store closing sales will begin at 154 locations.
- The Company expects additional phases of store closing sales will begin in the coming weeks.
- The list of stores that will begin closing can be found on the JCPenney Blog.
- We are continuing to serve our customers as we move through this process with a commitment to working seamlessly with our vendor partners and landlords.
- The health and safety of associates, customers, and communities remains a top priority, and the Company is gradually reopening stores and offices in a phased approach while following guidance from local and state orders.
- While the challenging market conditions have impacted our ability to meet current operational and financial objectives, we remain focused on returning JCPenney to sustainable, profitable growth by reestablishing the fundamentals of retail, re-envisioning our merchandise offerings and rolling out new innovations.
- In fact, we are moving full speed ahead on digital aspects of our Plan for Renewal – an area where we have been making rapid changes. We recently improved our mobile website, and the outcome was a faster, easier, and simpler shopping experience for our customers. In addition, our conversion, revenue and average order value all improved.
- Yes. In addition to approximately $500 million of cash on hand that we were already authorized to use, we have received authorization to access our DIP financing committed by our existing first lien lenders, which includes $450 million of new money.
- Under the terms of the DIP agreement, JCPenney has access to up to $225 million immediately, and will have access to an additional $225 million as needed after July 15, 2020, subject to certain conditions.
- This financing, combined with cash flow generated by the Company’s ongoing operations, is expected to be sufficient to meet our operational and restructuring needs.
- We will need to continue to be prudent with these funds as we are still operating in an uncertain time.
- We expect to move through this process as efficiently as possible while we continue running our business.
- In fact, we believe the RSA and the widespread support we have received from our asset-based lenders and first lien lenders will allow us to pursue a financial restructuring on an expedited timeframe.
- While, there is not a definitive timeline to share today, we will keep you informed of important milestones as we move forward.
- Yes, JCPenney’s current management team is expected to remain in place throughout this process.
- We have a newly refreshed, highly experienced team of retail executives who remain focused on rebuilding our business and restoring health to JCPenney.