As it turns to bankruptcy to rework its finances, J. C. Penney Company Inc. has secured debtor-in-possession commitments of $900 million, including $450 million in new funds.
However, not all of that money is immediately available to the struggling retailer: According to the Chapter 11 filing, which was made Friday evening in Texas bankruptcy court, the first half of that financing will be released to the company following a court hearing in June. The remainder, on the other hand, is contingent upon JCPenney‘s ability to meet certain business targets as required by its lenders.
Court documents show that the company must have either the support of two-thirds of its bankruptcy lenders for a business plan by July 15 or binding commitments from third parties to fund that business plan by August 15. If it’s unable to fulfill one of those goals, JCPenney must “immediately cease pursuing the plan,” and the second half of that financing will be used to conduct a sale of its assets.
In the meantime, the Plano-Texas based chain must continue paying its workers’ wages, providing benefits to all associates (including those who were furloughed) and making payments to vendor partners. As part of its transformation, it will also reduce its store footprint in phases throughout Chapter 11 proceedings. (The first phase of closures will be disclosed in the coming weeks.)
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At the time of the filing, JCPenney had $500 million in cash on hand, on top of the roughly $1.25 billion it tapped two months ago from its $2.35 billion revolving credit line, while its debt load sits at about $4 billion. According to court documents, the retailer has more than $1 billion in unsecured senior notes, for which Wilmington Trust serves as trustee. After that, its largest creditor is Nike, with an owed balance of more than $32 million. JCPenney also owes more than $7 million to Adidas, $5.7 million to Van Heusen Sportswear and nearly $4 million to Footwear Unlimited, parent to Baretraps and Andrew Geller. Additionally, New Balance has an unsecured claim of $3.2 million.
