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The funds, known as the “debtor in possession” loan, would be less than the $ 1 billion PID that the retailer originally sought, even if it would have included existing debt that was rolled over.
The company plans to file for bankruptcy as early as Friday, although the deadline may be further delayed, one said. He is working on a plan that plans to close 180 to 200 stores in the event of bankruptcy. The retailer had 846 department stores in February and employed approximately 90,000 full-time and part-time employees. People have warned that the plans are not yet finalized and nothing is certain.
As part of discussions with his preferred lenders, J.C. Penney would be able to withdraw $ 225 million from his bankruptcy loan on the first day. It will receive the rest of the funds depending on how well the company is doing on its budget, the conditions that its lenders are still working on. The structure helps protect J.C Penney’s lenders if the business fails because buyers fail to show up, the coronavirus returns, or both.
The US economy faces structural uncertainty as states seek to reopen their businesses, but the coronavirus continues to spread. White House health adviser Dr. Anthony Fauci warned on Tuesday that the United States could face more “suffering and death” from Covid-19 if certain states rushed to reopen the businesses too early.
For retailers, there is also uncertainty as to whether – and how – buyers will want to visit their stores.
For those considering bankruptcy, these issues have become more complex when negotiating loans with their lenders to help finance operations under the protection of a court.
“Even if businesses were to open their stores tomorrow – there are likely to be parts of the economy that will never be the same again,” said Russell Mills, bankruptcy attorney at law firm Bell Nunnally.
“In bankruptcy, you need to be able to forecast your income over a period of time – how can a debtor predict with certainty what his income will be for three to five years. “
Department store Discount Store Stores filed for bankruptcy Monday after the coronavirus pandemic left it “unable to obtain the necessary funding.” He plans to liquidate inventory in hundreds of his stores, a task made difficult, he said in court documents, in the current environment.
“Debtors cannot undertake store closure efforts until their stores reopen after the COVID-19 pandemic. And even after they reopen, it’s hard to predict consumer demand at that time, “said the brief.
Neiman Marcus, meanwhile, filed for bankruptcy last week with funding of $ 675 million and a commitment from his creditors to provide $ 750 million once he emerges.
The people requested anonymity because the information is confidential. A spokesperson for J.C. Penney declined to comment.