Plano-based J.C. Penney Company on Friday has filed for bankruptcy protection, hours after trading for the retailing institution’s stock halted.
The company, which filed its Chapter 11 voluntary petition in Corpus Christi federal court, chose a law firm team that has dominated the headlines regarding Texas-based bankruptcies: Kirkland & Ellis and Jackson Walker. The filing comes just one day after the two firms also filed for bankruptcy protection on behalf of Colorado-based Ultra Petroleum.
The two law firms are also handling the bankruptcies of major Texas-based retailers Neiman Marcus and Stage Stores.
There had been a good deal of speculation about J.C. Penney’s pending bankruptcy as the company tried to work out a deal with lenders — even as the company missed payments to lenders while their retail stores remained shuttered across the nation due to the effects of the novel coronavirus.
In a statement, the company said that it entered a restructuring support agreement with lenders holding approximately 70% of the company’s first lien debt as part of its restructuring plan.
The RSA “is expected to reduce several billion dollars of indebtedness, provide increased financial flexibility and help navigate through the Coronavirus (COVID-19) pandemic, and better position JCPenney for the long-term,” the statement says.
Houston-based Jackson Walker partner Matthew Cavenaugh filed JCP’s voluntary petition on behalf of the company. Lazard is serving as JCP’s financial advisor, while AlixPartners is serving as the restructuring advisor.
Assisting Cavenaugh at Jackson Walker are partner Jennifer Wertz in Austin, as well as partner Kristhy Peguero and associate Veronica Polnick in Houston.
The primarily New York-based Kirkland team includes restructuring partners Joshua Sussberg, Christopher Marcus and Aparna Yenamandra, along with associates Rebecca Blake Chaikin, and Allyson Smith Weinhouse. They are assisted by Chicago-based associate Jake William Gordon. Litigation partners Jeremy Fielding from the firm’s Dallas office and Mike Slade from the firm’s Chicago office are also working on the bankruptcy.
The case has been assigned to U.S. Bankruptcy Judge David Jones in the Southern District of Texas. Jones, along with U.S. Bankruptcy Judge Martin Isgur of SDTX’s Houston division, are familiar with complex corporate restructurings. Their expertise has made Texas-based companies and their creditors increasingly comfortable filing in Texas.
“When you file in [the Southern District of Texas], you know the bankruptcy judges that will be assigned the cases, and that offers predictability to clients and their counsel,” Porter Hedges partner Josh Wolfshohl told The Texas Lawbook in a recent interview. “Judge Jones and Judge Isgur were corporate bankruptcy practitioners. They have a very good understanding of what capital structures are like.”
JCPenney Senior Vice President and General Counsel Brandy Treadway signed off on some of the paperwork in the voluntary petition as the company’s secretary.
By far the largest unsecured creditor is Wilmington Trust holding a total of $1,315,772,000 in senior notes.
Largest Trade creditor (vendor) is Nike with $32.067 million followed by clothing manufacturers Alfred Dunner ($14.2 million) and Byer California ($12.607 million).
The only Texas-based creditor listed is Dallas-based Haggar Clothing Co., which is owed $6.1 million.
JCPenney has approximately $500 million in cash on hand as of the Chapter 11 filing date. JCPenney has received commitments for $900 million in debtor-in-possession (“DIP”) financing from its existing first lien lenders, which includes $450 million of new money.
JCP said that “the challenging market conditions have impacted the Company’s ability to meet its current operational and financial objectives.” The company said the agreement focuses on “returning JCPenney to sustainable, profitable growth by reestablishing the fundamentals of retail, re-envisioning its merchandise offerings and rolling out new innovations.”
Mark Curriden and Allen Pusey contributed to this report.