J. C. Penney Company Inc. could soon make its way out of bankruptcy.
The beleaguered retailer announced today that it has filed a draft asset purchase agreement, which tracks the terms of the previously announced letter of intent to sell its business. The step puts it closer to a deal with Simon Property Group Inc. and Brookfield Asset Management Inc.
As part of the draft, Simon and Brookfield, both mall giants, will acquire “substantially all” of JCPenney’s retail and operating assets through a combination of cash and new term loan debt. Separate property holding companies — comprising 160 of the chain’s real estate assets and all of its owned distribution centers — will also be formed and held by JCPenney’s debtor-in-possession and first lien lenders.
JCPenney wrote in a statement that “all parties are working to conclude negotiations and intend to utilize the ongoing mediation process to help achieve that goal.” (Last week, the company said in a filing that it was mediating with Simon and Brookfield, as well as a majority group of its first lien lenders, on issues related to working capital, certain closing adjustments and key elements of its master lease agreement.)
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Once finalized, the deal will be subject to court approval and other closing conditions. A hearing for the transaction is anticipated for early November. With the bankruptcy judge’s green light, it’s expected that the sale will close by the December, coinciding with the holiday shopping season.
“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,” JCPenney CEO Jill Soltau said in a statement. “We look forward to completing this sale and continuing our progress implementing our [restructuring plan].”
It’s been five months since JCPenney 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.