J.C. Penney Company is seeing light at the end of the tunnel with the help of two biggest landlords.
The bankrupt retailer said that it has reached an agreement “in principle” to sell substantially all of its retail and operating assets through a court-supervised sale process to Brookfield Property Group and Simon Property for $1.75 billion, which includes a combination of cash and new term loan debt. (Simon and Brookfield are landlords to a total of 160 of J.C. Penney stores.)
As part of the agreement, the parties could create a separate real estate investment trust and property holding company that would include 161 of Penney's real estate assets along with all its owned distribution centers. The investment trust will be owned by an ad hoc group of Penney’s first lien lenders, Penney's said.
Penney plans to seek approval from the bankruptcy judge for the deal, which is subject to competing bids, early next month. The company hopes to complete the auction and exit bankruptcy prior to the upcoming holiday season.
Wells Fargo has agreed to extend Penney $2 billion in revolving credit, and when the transaction is completed, Penney will be left with $1 billion in cash.
“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 J.C. Penney to build on our over 100-year history,” said CEO Jill Soltau. “The interest in our operations reflects our company’s strength and our loyal customer base.”
Penney declared bankruptcy in May, with plans to reduce its then 860-store footprint in phases.