J.C. Penney is reopening stores in Texas, Florida, Indiana and Ohio on Wednesday as the clock is ticking in the largest bankruptcy filed since the coronavirus pandemic shut down the economy.

Details have emerged about the chains difficult path for exiting Chapter 11. Penney will attempt to spin off its real estate into a separate company and permanently close stores while its still trying to reopen locations.

Two big deadlines loom if Penney is going to exit in November, the date it put on a proposed timeline.

But time is limited to meet various steps, and triggers are built into the lending agreements to convert the bankruptcy to a liquidation, either on July 14 or August 15.

By mid-July, Penney has to persuade the lenders financing its bankruptcy to give it the next $225 million of the $450 million of debtor-in-possession financing that it secured and is required to enter a court-led restructuring. The lenders will release that money if they support Penneys business plan to exit bankruptcy, which has to be filed in June. Then, in August, if Penney doesnt have the support of lenders to finance the retailer when it leaves bankruptcy, the agreement calls for the bankruptcy to convert to a liquidation.

The companys biggest lenders include H/2 Capital Partners, Sixth Street Partners, KKR & Co. and Ares Management Corp. Some of the investors overlap with leveraged buyouts of other retailers that ended poorly over the past decade.

Until earlier this month, Sixth Street was funded by TPG, which was part of the group that sold Neiman Marcus in a 2013 leveraged buyout sale of the Dallas-based luxury retailer to a group led by Ares. Neiman Marcus filed for bankruptcy this month, as did another TPG-led leverage buyout, J.Crew.

H/2 Capital is hedge fund that invests in real estate.

KKR led the leveraged buyout of Toys R Us, which ended up liquidating in 2018.

Penney is working on its business plan, which hasnt yet been filed with the court, but a preliminary version was filed Monday with the Securities and Exchange Commission. Penney said in that filing that it could permanently close as many as 242 stores of its 846 stores. Most of those locations, or 192 stores, are in leased space, and the remaining 50 are in buildings owned by Penney.

Before the pandemic, the proposed go-forward fleet of 604 stores had higher average sales and higher profitable sales.

Also, Penney proposes in its plan to sell a 35% stake in a separate new real estate company to raise cash. Thats actually part of its lending agreement. It also said its going to sell and lease back distribution centers to raise more cash. The plan calls for Penney to issue new stock in addition to the equity in the real estate investment trust.

Penney owns a lot of real estate, and that property is likely drawing interest. Some stores in dying malls are finding new life as online fulfillment centers.

Amazon, which has already converted some former mall stores into online operations, is looking at Penneys, according to a report Monday in Womens Wear Daily. Penney also has 11 distribution centers that would be in demand by lots of retailers, not just Amazon, as the industry makes a secular shift online.

Joshua Sussberg, Penneys attorney, said during a hearing Saturday afternoon in bankruptcy court that the company will work around the clock to deal with all the issues.

I am very worried about this, and why Im having a hearing on a Saturday, said U.S. Bankruptcy Court Judge David Jones during the webcast hearing with 300 people on the line. The judge approved customary first-day motions that allowed Penney to continue paying employees, utilities and other operating expenses, including the honoring of gift cards.

Jones, who is also presiding over the Neiman Marcus bankruptcy case in Houston, reminded the lawyers, management, advisers, lenders and creditors on the call that retail bankruptcies have to move quickly regardless of the strength of the debtor.

I want to see this work. You have 85,000 people (Penney employees) depending on all of your skill sets and talents, Jones said.

A total of 153 of Penneys 846 stores will be open this week, including 34 stores in Texas, 12 in Florida, 7 in Indiana and 11 in Ohio.

A few more local stores will open but not all of its stores in Dallas-Fort Worth. Stores will open Wednesday in Frisco, Burleson, Mesquite, Rockwall, Sherman and Waxahachie. Arlington, Fairview and Alliance Town Center in Fort Worth have been open since earlier this month.

Penneys stores are opening with reduced hours Monday through Saturday from noon to 7 p.m. and Sunday from 11 a.m. to 6 p.m. Penney has added pandemic-related new practices and training, including additional cleaning and Plexiglass shields.

Heres the list of Texas stores reopening Wednesday:

Longview Mall 3550 McCann Rd Longview

South Plains Mall 6002 Slide Rd-Bldg A Lubbock

Ingram Park Mall 6301 Nw Loop 410 San Antonio

Cielo Vista Mall 8401 Gateway Blvd W El Paso

Meyerland Plaza 730 Meyerland Plaza Mall Houston

South Park Mall 2418 Sw Military Dr San Antonio

River Hills Mall 200 Sidney Baker St S (Hwy 16) Kerrville

La Palmera Mall 5488 S Padre Island Dr Ste 4000 Corpus Christi

Parkdale Mall 6455 Eastex Frwy Beaumont

Sunset Mall 6000 Sunset Mall San Angelo

Richland Mall 6001 W Waco Dr Waco

Barton Creek Square 2901 S Capitol of Texas Hwy Austin

Mall De Las Aguilas 455 S Bibb St Eagle Pass

Killeen Mall 2100 S W S Young Dr Ste 2000 Killeen

Valle Vista Mall 2006 S Expy 83 Harlingen

Victoria Mall 8106 N Navarro St Victoria

Post Oak Mall 1500 Harvey Rd College Station

Town East Mall 6000 Town East Mall Mesquite

First Colony Mall 16529 Southwest Frwy Sugar Land

Woodlands Mall 1201 Lake Woodlands Dr Ste 500 The Woodlands

Stonebriar Mall 2607 Preston Rd Frisco

Rolling Oaks Mall 6909 N Loop 1604 E San Antonio

Burleson Town Center 877 Ne Alsbury Blvd Burleson

Baybrook Mall 100 Baybrook Mall Friendswood

The Rim 17710 La Cantera Pkwy San Antonio

Memorial City 300 Memorial City Way Houston

The Crossing At 288 2500 Smith Ranch Rd Pearland

Tech Ridge Center 12351 N Ih-35 Austin

Southpark Meadows 9500 S Ih-35 Ste H Austin

Plaza At Rockwall 1015 E I 30 Rockwall

Waxahachie Crossing 1441 N Hwy 77 Waxahachie

Brazos Town Commons 24201 Brazos Town Crossing Rosenberg

Sherman Town Center 610 Graham Dr Sherman

Stonecreek Crossing 800 Barnes St San Marcos

These Texas locations are offering contact-free curbside pickup only:

North East Mall 1101 Melbourne Dr. Hurst

La Plaza 2200 S. 10th St Mcallen

Music City Mall 4101 E. 42nd St. Odessa

Broadway Square Mall 4401 S. Broadway Tyler

Twitter: @MariaHalkias

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JC Penney to reopen 153 stores as clock is threatening its bankruptcy reorganization - The Dallas Morning News