J.C. Penney announced this week that it entered an asset purchase agreement (APA) with property owners Brookfield Asset Management and Simon Properties, as well as a majority of the company’s first lien lenders. The retailer filed for bankruptcy in a Texas court in May after the COVID-19 pandemic forced it to temporarily close approximately 850 stores. J.C. Penney plans to operate outside Chapter 11 prior the holiday season.
Under the APA, Simon and Brookfield will acquire all of J.C. Penney’s retail and operating assets through a combination of cash and new term loan debt. The agreement also calls for separate holding companies to be formed, which will comprise 160 of the company’s real estate assets and all of its owned distribution centers. Lenders will sign master lease agreements with Brookfield and Simon.
“Signing a definitive APA with Brookfield, Simon and our majority first lien lenders allows us to move forward towards the completion of our financial restructuring,” J.C. Penney Chief Executive Officer Jill Soltau said in a statement. “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.”
The APA comes after Brookfield and Simon tried to purchase the retailer outright for $300 million in cash and assume $500 million in debt in September, according to The Real Deal. The sale talks broke down in October after lenders missed some key deadlines, Bloomberg reports. The APA still allows Simon and Brookfield to maintain control while JC Penney gets some much needed relief as the holiday season fast approaches.
“Our goal from the beginning of this process was to ensure J.C. Penney will continue to serve customers for decades to come and this court approval accomplishes that objective,” Soltau said after the U.S. Bankruptcy Court for the Southern District of Texas approved the APA on November 9th. “With the 2020 holiday season in full swing, we’re excited to operate under the new ownership of Brookfield and Simon outside of Chapter 11 and under the J.C. Penney banner.”
The operating assets transaction remains subject to additional closing conditions, but is expected to close by the end of November.
Joe Dyton can be reached at firstname.lastname@example.org.