May 15, 2020

J.C. Penney Co. Inc. has filed for Chapter 11 bankruptcy as part of its process to remain operating and will close some stores.

The company announced Friday that it has entered into a restructuring support agreement with lenders who hold 70 percent of its first-lien debt to reduce the company’s debt, which is several billion dollars, and strengthen its financial position.

Those lenders will provide $900 million in debtor-in-possession financing to help it continue operations.

“As part of its ongoing transformation, JCPenney will reduce its store footprint to better align its business with the current operating environment,” the company said in a statement. “Stores will close in phases throughout the Chapter 11 process – and the first phase of closures, including specific store details and timing, will be disclosed in the coming weeks.”

It did not specify how many of its 850 stores would close.

The company has slowly started reopening stores that have been closed because of the COVID-19 pandemic. The JCPenney store in Sioux Falls did not reopen with The Empire Mall on May 8. Stores in Brookings and Rapid City remain closed.

“The coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities and our country. As a result, 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. 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,” said Jill Soltau, chief executive officer of JCPenney.

“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. 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. We are also 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 reorganization.”