J.C. Penney to Exit Chapter 11 Bankruptcy Ahead of Holidays Says CEO

According to the Chief Executive of struggling department store chain J.C. Penney, the retailer is expected to exit Chapter 11 Bankruptcy before the holiday season.

CEO Jill Soltau said this week that the company expects to exit Chapter 11 ahead of the holiday season.

The department store chain revealed in a news release that it has taken another step toward a
sale to U.S. mall owners Brookfield Property Partners and Simon Property Group. The company has filed a draft asset purchase agreement, which gets it closer to a deal.

The deal is still subject to court approval and other conditions and a hearing is set for early November, the company said.

At a court hearing this past September, Joshua Sussberg of the law firm Kirkland & Ellis said the mall owners were working toward finalizing an $800 million deal to rescue the company from bankruptcy. According to Sussberg, the move would save about 70,000 jobs and 650 stores.

It was on Tuesday that J.C. Penney reiterated plans to have Brookfield and Simon own and operate its retail assets. Meanwhile, 160 of its real estate assets and its distribution centers will become part of separate property holding company owned by a group of its lenders.

According to a press release from the retailer, all parties are working to conclude negotiations and intend to utilize the ongoing mediation process to help achieve that goal. Key terms of the draft APA are as follows:

Brookfield Asset Management, Inc (“Brookfield”) and Simon Property Group (“Simon”) will acquire substantially all of JCPenney’s retail and operating assets (“OpCo”) through a combination of cash and new term loan debt.

The formation of separate property holding companies (“PropCos”), comprising 160 of the Company’s real estate assets and all of its owned distribution centers, which will be owned by the Company’s Debtor-in-Possession and First Lien Lenders (“First Lien Lenders”).

The OpCo and PropCos will enter into a master lease with respect to the properties and distribution centers moved into the PropCos.

“This is another important milestone in our restructuring plan, bringing us one step closer to finalizing the APA, closing the sale process and exiting Chapter 11 ahead of the December 2020 holiday season,” said CEO Jill Soltau.

“Our talented team is focused on working with Brookfield and Simon to build on our over 100-year history of serving customers and working seamlessly with our vendor partners. We look forward to completing this sale and continuing our progress implementing our Plan for Renewal to Offer Compelling Merchandise, Drive Traffic, Deliver an Engaging Experience, Fuel Growth and Build a Results-Minded Culture.”

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.