New York(CNN Business) As JCPenney struggles with missed debt payments and prepares for a possible bankruptcy filing, it approved bonuses of $1 million or more to its top four executives.
JCPenney won't comment on its bankruptcy plans, but it disclosed that it missed two recent debt payments: $12 million due to bond holders on April 15, and a $17 million payment due on a credit line this past Thursday. The grace periods for those missed payments are Thursday and Friday this week, suggesting a bankruptcy filing could be imminent.
But the company announced Monday evening it has paid a $4.5 million bonus to CEO Jill Soltau, and bonuses of $1 million each for CFO Bill Wafford, Chief Merchant Michelle Wlazlo and Chief Human Resources Officer Brynn Evanson. JCPenney said the big paydays are designed to keep its top talent on board.
"At JCPenney, we are making tough, prudent decisions to protect the future of our company and navigate an uncertain environment, including taking necessary steps to retain our talented management team," said a company in a statement.
Under the plan, the executives will have to repay 80% of their bonuses if they resign before January 31, 2021. They will have to repay the other 20% if specified milestone-based performance goals are not achieved.
They must also forfeit the right to any annual bonus plans or long-term incentive awards for the current fiscal year, as well as forfeit all of his or her outstanding equity or options for past awards. But bonuses for this fiscal year are unlikely considering the company's financial problems, and any holders of JCPenney ( equity are likely to be wiped out in a bankruptcy filing. )
The compansaid the executives had been making progress turning the company around before the Covid-19 pandemic forced it to close the majority of its stores.
"Maintaining continuity of leadership is and will continue to be critical to the future of our company's long-term success," said the company. "Our compensation program is in line with those of other companies in similar situations and is aligned with milestone-based performance goals to continue incentivizing our team to drive results."
Bankruptcy filings often include deep job cuts, and in many cases, those employees who are laid off are unable to get the severance payments that they would normally receive with the loss of their jobs. Bankruptcy law gives a preference to creditors over employee severance payments.
If any of the executives have to repay bonuses, the money will be set aside to pay severance. But there are a number of JCPenney employees who could lose their jobs if their stores close as part of a reorganization. The company had about 90,000 employees as of February 1.
Earlier this week, 16 JCPenney stores out of nearly 850 nationwide reopened. Another 25 openings were announced Wednesday. And it has another 13 stores allowing curb-side pickup, although those locations are not allowing shoppers to go inside the stores.