After 118 years in business, J.C. Penney (JCP) - Get Report formally filed for chapter 11 bankruptcy protection on Friday, becoming the third major U.S. retailer to fall victim to the coronavirus pandemic and ongoing economic shutdown.
The bankruptcy filing, which was announced after the market close, ends a tumultuous two months for the retailer, which was already struggling under more than $3.8 billion in debt when it shuttered its portfolio of 850 stores and head office in mid-March.
The retail chain skipped two debt payments in the last month, though on Thursday it said it made a $17 million interest payment on a loan, avoiding default. Earlier this week the company was reportedly locking in $450 million in financing to navigate chapter 11.
Founded in 1902 by James Cash Penney, who opened his first store in Kemmerer, Wyo. called the Golden Rule, J.C. Penney went public in 1929 amid the stock market crash. it expanded over the years to become an anchor in suburban malls throughout the U.S.
Over the years the company suffered from increased competition and lagging sales that accelerated with the growth of Amazon (AMZN) - Get Report and other online retailers. Those changes spurred it to turn to the debt markets to fund efforts to re-invigorate its brand.
“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.
The company had been in discussions with some of its largest lenders, including Sixth Street Partners and the credit-investing arms of KKR & Co., Apollo Global Management, and Ares Management, as well as H/2 Capital Partners, people familiar with the matter told the Wall Street Journal.
Collegiate prep style retailer J.Crew filed for bankruptcy less than two weeks ago followed a few days later by Neiman Marcus Group.
Shares of J.C. Penney ended the trading day Friday up 21.24% at 23.63 cents. They were down 28.4% at 0.1692 cents in after-hours trading.