JC Penney Co. lenders have agreed to team up with mall owners Simon Property Group Inc. and Brookfield Property Partners to buy the bankrupt department store chain.
The interim bailout deal, which would save about 70,000 jobs, includes a $ 300 million capital investment by owners, Joshua Sussberg of Kirkland & Ellis said on behalf of JC Penney in a bankruptcy hearing Wednesday. It also requires new funding from existing lenders and would ultimately leave the retailer around $ 1 billion, subject to some transaction costs and a working capital adjustment, Sussberg said.
The funding includes a $ 2 billion commitment of new asset loans led by Wells Fargo, as well as $ 500 million of takeover debt from existing senior lenders, he said. The deal would split JC Penney into an operating company and two real estate holding companies, one with 161 stores and the other with distribution centers, with a master lease agreement between the two parties.
“The transaction between the lenders, the company and Simon and Brookfield envisions a total business of $ 1.75 billion, plus a post-closing price supplement and a widely negotiated working capital adjustment,” Sussberg said at the ‘hearing.
JC Penney intends to release the details of the signed, non-binding LOIs on Wednesday evening or Thursday morning, Sussberg said. The deal could still fail and requires court approval, which the retailer intends to seek in early October.
“Time, as we have said many times, is not our friend,” Sussberg said. “It is important – for this transaction to stay together and for all of these stores to stay open and for the 70+ thousand employees to remain employed – that we move forward at lightning speed.”
The Wall Street Journal earlier reported that the deal is valued at around $ 800 million, with mall owners taking about 490 of the chain’s 650 stores. Lenders would swap part of their debt for control of 160 additional locations and distribution centers, which would be re-let to owners, the Journal reported.
The group of lenders were already on the verge of taking over most of JC Penney’s real estate at the start of the bankruptcy case, with a plan that would have included turning the properties into a real estate investment trust and selling the rest. from retailer to highest bidder. . Attempts to strike a sales deal with outside bidders met with roadblocks as the deal dragged on.
The case is JC Penney Company Inc., 20-2082, US Bankruptcy Court for the Southern District of Texas (Corpus Christi).
