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J.C. Penney exits Chapter 11

J.C. Penney's retail business has turned the page and opened a new chapter in its 118-year history.  

The long-struggling retailer on Monday announced that it has officially completed its previously announced sale under which Simon Property Group and Brookfield Asset Management acquired substantially all of Penney’s retail and operating assets (“OpCo”). The deal, which was approved by a bankruptcy court in early November, was for $300 million in cash and the assumption of a new term loan of $500 million. 

“Today is an exciting day for our company, as we have accomplished our goal of putting J.C. Penney on a secure path for the future as a private company so that we can continue to serve our loyal customers,” said Jill Soltau, CEO, J.C. Penney.  With this closing, our operating company has exited Chapter 11 and is continuing under new ownership and the J.C. Penney banner.”

It’s estimated that Penney, which closed stores throughout the bankruptcy process, exits Chapter 11 with close to 700 stores nationwide. 

Under Penney's new structure, the company is split into two entities. Simon and Brookfield own Penney’s retail and operations assets while Penney’s first-lien lenders control the 160 of the company’s real estate assets and all of its owned distribution centers.  Penney will pay annual rent for the properties. 

The property business, or PropCos, is still undergoing the restructuring process in court and is expected to emerge from Chapter 11 bankruptcy protection in the first half of 2021.

“We have always been firm believers in J.C. Penney, and are very pleased to help preserve this iconic institution and save tens of thousands of jobs,” said David Simon, chairman, CEO and president of Simon Property Group. “J.C. Penney is now poised for a future focused on innovation and consumers, while continuing to navigate through the pandemic. We are excited about J.C. Penney’s future growth and look forward to collaborating with the J.C. Penney team to serve its customers and communities.”

Added Brian Kingston, CEO of real estate at Brookfield Asset Management: “This is exactly the type of investment our retail revitalization program was designed to make and along with our partner Simon we have a successful blueprint in place to deploy our collective operational expertise and industry relationships to transform J.C. Penney through new innovations and offerings.”

With the completion of the sale, Penney has access to approximately $1.5 billion of new financing.  

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