What’s Next for JCPenney as It Emerges From Bankruptcy With New Owners?

J. C. Penney Company Inc. is exiting bankruptcy.

The department store announced last night that it entered into an asset purchase agreement with retail real estate giants Brookfield Asset Management Inc. and Simon Property Group, as well as a majority of its debtor-in-possession and first lien lenders. The deal allows it to move forward with the completion of its financial restructuring plan ahead of the critical holiday shopping season.

“This transaction is a testament to the thousands of dedicated employees who have been working incredibly hard over the last several months under difficult circumstances,” CEO Jill Soltau said in a statement. “Our customers are at the heart of JCPenney, and we look forward to serving them under the JCPenney banner for decades to come.”

As part of the transaction, Brookfield and Simon will acquire “substantially all” of the chain’s retail and operating assets through a combination of cash and new term loan debt. Separate property holding companies — made up of 160 of the retailer’s real estate assets and all of its owned distribution centers — will also be formed and held by JCPenney’s DIP and first lien lenders.

Five months ago, the beleaguered retailer sought Chapter 11 protection after struggling for several years amid declining sales, numerous leadership changes, increased digital competition and, more recently, challenges induced by the pandemic. According to a Securities and Exchange Commission filing last month, its sales tumbled 44% to $1.4 billion during the period ended Aug. 1. It also widened its net losses to $398 million, or $1.23 per diluted share, compared with the prior year’s losses of $48 million, or 15 cents per share.

Its departure from bankruptcy had hit an impasse that led to mediation discussions as recent as two weeks ago between JCPenney and the mall owners. With Judge Marvin Isgur, the parties worked out issues related to working capital, certain closing adjustments and key elements of the master lease agreement.

Now, as it heads into the holidays, JCPenney expects to implement its plan for renewal to “offer compelling merchandise, drive traffic, deliver an engaging experience, fuel growth and build a results-minded culture.” The season, which includes both Black Friday and Cyber Monday, is often considered the most important quarter for retailers.

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