US department store chain J.C. Penney (JCPenney) has filed for bankruptcy protection besides reducing its store count to better align its business with the prevailing operating environment resulting from the coronavirus crisis.

The retailer has signed a restructuring support agreement (RSA) with lenders holding nearly 70% of its first lien debt to reduce its outstanding indebtedness and bolster its financial position.

Contemplated in the restructuring support agreement are agreed-upon terms for a pre-arranged financial restructuring plan that is hoped to cut down several billion dollars of indebtedness, offer increased financial flexibility to help navigate through the COVID-19 pandemic, and put JCPenney in a better position for the long-term.

The filing of bankruptcy protection has been done to implement the financial restructuring plan, said the US department store chain.

JCPenney said that implementation of the financial restructuring will enable it to speed up its store optimization strategy. The department store chain will close its stores in a phased manner throughout the Chapter 11 process.

The Texas-based retailer, which has nearly 850 stores across the US, said that the first phase of closures, including specific store details and timing, will be revealed in the coming weeks.

Jill Soltau – CEO of JCPenney said: “The Coronavirus (COVID-19) pandemic has created unprecedented challenges for our families, our loved ones, our communities, and our country. As a result, the American retail industry has experienced a profoundly different new reality, requiring JCPenney to make difficult decisions in running our business to protect the safety of our associates and customers and the future of our company.

“Until this pandemic struck, we had made significant progress rebuilding our company under our Plan for Renewal strategy – and our efforts had already begun to pay off. 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.”

  Coronavirus, COVID-19, JCPenney, Jill Soltau, USA