J. C. Penney Company Inc.’s landlords are set to buy it out of bankruptcy.
The department store announced last night that it has reached an agreement to sell its business to Simon Property Group and Brookfield Property Partners. As part of the deal, the mall giants plan to acquire “substantially all of JCPenney’s retail and operating assets” for $1.75 billion, with a combination of cash and debt.
In addition to the purchase of its operations, JCPenney is forming a separate real estate investment trust and a property holding company, including 161 of its real estate assets and all of its owned distribution centers.
“We have determined that an agreement with Brookfield and Simon, as well as the formation of separate real estate investment trusts owned by our first-lien lenders, is the best path forward to maximize value for our stakeholders, ensure we keep the most stores open and associates employed and position JCPenney to build on our over 100-year history,” CEO Jill Soltau said in a statement. “The interest in our operations reflects our company’s strength and our loyal customer base.”
She added, “As we continue to move through the sale process, our focus will remain on serving our customers and working seamlessly with our vendor partners. We have been a trusted partner to all of our stakeholders since 1902, and we expect to continue that track record for decades to come under the JCPenney banner.”
Watch on FN
As the stalking-horse bidder, Simon, Brookfield and the first-lien lenders are expected to complete the sale ahead of the 2020 holiday shopping season. According to JCPenney attorney Joshua Sussberg of Kirkland & Ellis, the deal is expected to keep intact more than 600 stores and 70,000 jobs.
After struggling for several years amid declining sales, numerous leadership changes and increased digital competition, JCPenney filed for Chapter 11 protection on May 15. It obtained $900 million in debtor-in-possession financing to aid operations and expects to close 242 doors, or about 29% of its fleet, by February. In late August, a court filing showed that its net loss for the month ended July 20 was $342.1 million, while revenues were $564.3 million, compared with an income of $46.2 million and sales of $621.7 million for June.