J.C. Penney Co Inc filed for bankruptcy protection on Friday with plans to permanently close some stores and also explore a possible sale, making it the latest brick-and-mortar retailer to crumble as prolonged store closures in response to the COVID-19 pandemic drive a final stake through long-troubled businesses.
The U.S. department store chain, known for selling family apparel, cosmetics and jewelry at roughly 850 locations, said it reached an agreement with existing lenders for US$900 million of debtor-in-possession financing to aid operations while it navigates bankruptcy proceedings in federal court in Corpus Christi, Texas.
The loan consists of US$450 million in fresh financing, the company said. The balance is made up of existing debt being rolled up to be given the same legal status as the new funding that J.C. Penney obtained, people familiar with the matter said. The retailer said it had an additional US$500 million in cash on hand before the bankruptcy filing.
While J.C. Penney plans to reorganize and emerge from bankruptcy proceedings after eliminating several billion dollars of debt, it will also explore a sale as part of the terms of its new financing, the company said.
The company on Friday said it would begin closing some stores permanently in phases and would disclose further details in coming weeks. People familiar with the matter previously said the company initially plans to permanently shutter roughly 200 stores, saying the figure could fluctuate depending on negotiations with creditors.
The bankruptcy filing caps a long decline for the 118-year-old department store chain, which once operated more than 1,600 locations that became fixtures in U.S. malls. The company at one point employed nearly 200,000 people.
Even before the coronavirus outbreak, J.C. Penney was struggling with nearly US$4 billion of debt and pressure from both discount retailers and e-commerce companies.
Larger retailers such as Walmart Inc and Target Corp have squeezed smaller rivals by offering bargain-price apparel, including online.
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