A parking lot at a J.C. Penney store is empty in Roseville, Mich., May 8, 2020. (PAUL SANCYA/AP)

J.C. Penney Co. filed for bankruptcy, punctuating decades of decline and failed turnaround plans for the once ubiquitous mainstay of America’s shopping malls.

The Chapter 11 filing allows the giant department store chain to stay in business and work out a way to pay its bills. Some of the chain’s stores will be closed permanently, with locations to be disclosed in the coming weeks, and the company could be put up for sale, J.C. Penney said in a statement.

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While the sudden shock from the coronavirus outbreak ultimately undid J.C. Penney, the chain has struggled for years to keep customers from defecting and ease its multibillion-dollar debt load.

Implementing this financial restructuring plan through a court-supervised process is the best path to ensure that J.C. Penney will build on its over 100-year history to serve our customers for decades to come 

Jill Soltau, J.C. Penney CEO

Its bankruptcy filing in Corpus Christi, Texas, included US$900 million to fund the company during its restructuring, including US$450 million of fresh capital from existing lenders. About 70 percent of its first-lien lenders have signed on to the plan.

The company said it owed about US$8 billion to more than 100,000 creditors, and the restructuring plan aims to reduce the total by “several billion dollars.” It will explore strategic alternatives, including a third-party asset sale, as a condition of the financing agreement.

Turnaround effort

Chief Executive Officer Jill Soltau, the first female head of the Plano, Texas-based company, joined in 2018 and embarked on a lofty turnaround plan. The shutdown of the stores caused by the pandemic made it impossible for Soltau to carry it out.

“Implementing this financial restructuring plan through a court-supervised process is the best path to ensure that J.C. Penney will build on its over 100-year history to serve our customers for decades to come,” Soltau said in the company’s statement.

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J.C. Penney called its Chapter 11 filing a pre-arranged bankruptcy, using a term of art reserved for cases that have some support from creditors, but not enough to push through the court process as quickly as a fully prepackaged case that has already been voted on by all the debt holders.

Founded by James Cash Penney in 1902, J.C. Penney operated 846 department stores in 49 states and Puerto Rico as of Feb 1, according to company filings. The stock, which traded for more than US$87 in 2007, now sells for just pennies per share.

The case is J.C. Penney Company Inc., 20-20182, U.S. Bankruptcy Court for the Southern District of Texas (Corpus Christi).