J.C. Penney on track for Chapter 11 exit before holiday shopping season
JCPenney’s lifeline is getting stronger as a rescue comes together before the key holiday shopping season.
After a lengthy court hearing on Monday, the 118-year-old retail giant has received approval from the U.S. Bankruptcy Court for the Southern District of Texas on its previously announced asset purchase agreement with Brookfield Asset Management and Simon Property Group.
“Our goal from the beginning of this process has been to ensure JCPenney will continue to serve customers for decades to come and this Court approval accomplishes that objective,” JCPenney CEO Jill Soltau said in a statement. “We appreciate the efforts of the Court and the support of our creditors in this process and putting us in a strong position to build on JCPenney’s long track record of taking care of our associates, customers, vendor partners and communities.”
The court approval clears yet another hurdle that will allow the company to exit its Chapter 11 bankruptcy before the holiday season, with the transaction now expected to close in late November.
Brookfield and Simon will acquire substantially all of JCPenney’s retail and operating assets through a combination of cash and new term loan debt. Meanwhile, a group of First Lien Lenders will own 160 of the company’s real estate assets and all of its owned distribution centers as part of a separate property holding company.
JC Penney also plans to permanently close nearly a third of its 846 stores as part of a restructuring over the next two years, which would leave the company with just over 600 locations. Bankruptcy lawyer Joshua Sussberg of Kirkland & Ellis said at a hearing back in September that the rescue deal would save roughly 70,000 jobs.
The move by the court comes as JCPenney’s fate was hanging by a thread, with its financing agreement set to expire on Nov. 16. The sale would have to close by Nov. 20 for the company to avoid going out of business. The company filed for Chapter 11 in May after the spread of the coronavirus pandemic led to a wave of store closures.
Other retailers who were forced to seek bankruptcy protection as a result of the pandemic include J. Crew Group Inc, Neiman Marcus Group and Brooks Brothers.