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If you spent the past 48 hours scrubbing baseboards, filing taxes, or opening Twitter, your weekend was still better than JCPenney’s. The 118-year-old retailer filed for Chapter 11 bankruptcy on Friday evening, then spent Saturday in bankruptcy court.
Retail Brew readers know merchandising missteps and growing competition helped JCPenney dig its $4.9 billion debt hole. So let’s discuss how JCPenney could restructure its way out.
Plan A: Shrink its real estate footprint. Like other retailers that landed in dire financial straits, JCPenney will permanently close some stores and pursue sale-leaseback deals for its distribution centers.
JCPenney also proposed spinning off its properties into a publicly traded real estate investment trust (REIT). With bankruptcy lenders’ permission, it could sell a 35% stake in the REIT to generate liquidity.
- Sears created a REIT spin-off in 2015. That didn’t prevent the former mall staple from filing for Chapter 11 in 2018 or landing on bankruptcy watch lists for a second time this year.
Plan B: Sell all of JCPenney’s assets. JCPenney has until July 15 to make inroads with Plan A, or bankruptcy lenders will withhold a second round of financing and list the store in the classifieds section.