S.D. Texas Chapter 11: J. C. Penney Company, Inc.
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All Documents Can Be Accessed by Clicking the Case Title Immediately Above
CASE DETAILS
Link: Petition
On May 15, 2020, J. C. Penney Company, Inc. and seventeen of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code for the Southern District of Texas. The Debtors are represented by Kirkland & Ellis LLP as lead counsel and Jackson Walker L.L.P. as local counsel. The case has been assigned to the Honorable David R. Jones. A hearing on the Debtors’ first day motions was held on May 16, 2020. A hearing to consider the final DIP order will be held on June 2, 2020 at 3:00 p.m. (CT). A final hearing on certain first day motions will be held on June 11, 2020 at 1:30 p.m. (CT).
ABOUT THE DEBTORS
Link: Affidavit in Support
The Debtors are a 118-year old American retail icon that plays an important role in the lives of its customers and hundreds of communities throughout the country. By May 2018, the Company was on its fourth CEO in seven years. Before the COVID-19 pandemic, the Debtors had a substantial liquidity cushion, was improving its operations, and was proactively engaging with creditors to deleverage its capital structure and extend its debt maturities to build a healthier balance sheet. Unfortunately, that progress was wiped out with the onset of COVID-19. As a result, the Debtors are unable to maintain their upward trajectory through their “Plan for Renewal.” Moreover, following the temporary shutdown of its 846 brick-and-mortar stores on March 18, 2020, the Debtors are unable to responsibly pay the upcoming debt service on its over-burdened capital structure. Due to the pandemic, April year-over-year net sales tumbled by ~88% and store sales decreased to nearly zero. The severe sales decrease resulting from these crucial but economically painful public safety measures has necessitated these chapter 11 cases. As of the Petition Date, the Debtors employed approximately 85,000 individuals, 92% of whom had been furloughed.
FINANCIAL CONDITION
As of the Petition Date, the Debtors’ capital structure consists of outstanding funded-debt obligations in the aggregate principal amount of approximately $4.9 billion, consisting of $3.6 billion in secured debt and $1.3 billion in unsecured debt. The Company and its first lien group reached agreement on a comprehensive, pre-negotiated restructuring consisting of a $900 million DIP facility, $450 million of which will be in the form of new money. The Debtors own many of its locations and will be transferring real estate into a real estate trust. The remaining assets and operations will become the reorganized debtors. The Company is currently conducting an investment banking process in order to sell some or all of its assets, which could result in a section 363 sale. The Company and its lenders want to move quickly to conclude these transactions so the Company is ready to emerge from bankruptcy before the holiday shopping season. The Debtors plan on closing nearly a third of its stores, 242, by next year.
DIP/CASH COLLATERAL MOTION
Links: DIP Motion DIP Budget
The Debtors have finalized terms and executed a restructuring support agreement with an ad hoc committee of prepetition lenders and noteholders, and the Debtors’ prepetition equity sponsors, through which the Debtors will de-lever by approximately $1.65 billion, right-size their store footprint, and emerge from chapter 11 as a going concern in approximately 120 days. The agreement provides for $400 million of new-money financing commitments, equitizing approximately $2 billion of the Debtors’ prepetition secured term loans and prepetition secured notes into approximately 82% of the Debtors’ reorganized equity. Milestone dates include a filed plan and disclosure statement by May 18, 2020; a final DIP order by June 13, 2020; a disclosure statement order by July 13, 2020; solicitation of the plan by July 23, 2020; a confirmation order by September 1, 2020; and an effective date by September 11, 2020.
BAR DATE MOTION
On May 15, 2020, the Bankruptcy Court entered an order establishing the following bar dates:
General Bar Date including section 503(b)(9) claims July 10, 2020 at 5:00 p.m. (CT)
Governmental Bar Date November 12, 2020 at 5:00 p.m. (CT)
Related First-Day Motions Can Be Accessed by Clicking on the Links Below
SUMMARY OF FIRST DAY MOTIONS (Excel chart)