By Alan Wolf, YSN
JCPenney’s lenders are giving the bankrupt retailer two months to come up with an acceptable turnaround plan or face either a sale of the business or liquidation.
The struggling department store chain, which filed for Chapter 11 bankruptcy protection on Friday, has long been on the ropes, weighed down by nearly $5 billion in debt and lost within a changing retail landscape. But according to the bankruptcy filing, and a rare bankruptcy court hearing by phone on Saturday, government-mandated shutdowns stemming from the coronavirus crisis finally pushed the retailer over the edge, CNBC reported.
“The company’s primary revenue stream of in-store sales evaporated overnight,” Chief Financial Officer Bill Wafford said in a court document.
Under terms of the filing, the chain is to receive $900 million in bankruptcy financing by July 15 — assuming two-thirds of its lenders support the retailer’s turnaround plans. The strategy calls for closing some stores permanently; focusing on customer service, apparel and low prices; and possibly splitting the company into two separate entities, one a retailer and the other a real estate investment trust.
But should JCPenney’s largely hedge fund lenders fail to approve the plan, or should the company fail to receive binding financial commitments by August 15, the chain will be ordered to sell off its assets.
JCPenney was founded in Kemmerer, Wyo., in 1902 by James Cash Penney. In recent years, the once powerful apparel and home fashions leader was rocked by the ascension of Walmart, Amazon and e-commerce, and by changes in management and direction that left it further adrift and deeper in debt. The latter include the decision by onetime CEO and former Apple Stores chief Ron Johnson to drop Penney’s high-low sales promotion strategy, and the attempt by his successor, Marv Ellison, to re-enter the home appliance category.
Ellison has since gone on to head Lowe’s, and Penney, under current CEO and former Joann Stores chief Jill Soltau, has since exited the white-goods business, leaving furniture, mattresses and bedding as the main categories in which it still competes with BrandSource dealers.
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