Retailer JC Penney left for dead, is being resuscitated by two of the nation's largest landlords potentially saving 70,000 jobs.
JC Penney confirmed on Wednesday night that a deal has been reached in principal that will keep the retail chain afloat after the company filed for bankruptcy back in May as its stores, which were already facing challenges, took a turn due to the coronavirus pandemic.
"We are in a position to move this into the end zone," said Joshua Sussberg, a lawyer representing JC Penney, during a status hearing earlier in the day Wednesday. "And we are in a position to do exactly what we set out to do at the very beginning of these cases, and that is preserve 70,000 jobs, a tenant for landlords, a vendor partner and a company that has been around for more than a century."
The deal would give JC Penney an enterprise value $1.75 billion, including $300 million in cash from Simon and Brookfield and $500 million in new debt. In addition, there will also be a loan of $2 billion from the company's existing lender, Wells Fargo, and a FILO loan of approximately $310 million.
"What that all will do based on significantly negotiated sources and uses among the parties, it'll put the company in a position where it will have approximately $1 billion at the close of the transaction, subject, of course, to the working capital adjustment and the payments of costs and expenses associated with the transaction," Sussberg added.
|SPG||SIMON PROPERTY GROUP INC.||146.78||+0.68||+0.47%|
|WFC||WELLS FARGO & CO.||53.59||+0.27||+0.51%|
Both Simon Property and Brookfield Property Partners did not immediately return FOX Business' requests for comment.
According to the press release from JC Penney, the agreement will establish a real estate investment trust and a property holding company owning 161 JC Penney stores and distribution centers. These entities will be owned by JC Penney's first-lien lenders, which will rent the locations to the operating company owned by Simon and Brookfield.
"It is anticipated that the Company will complete the auction and emerge from the Court-supervised process operating under the JCPenney banner in advance of the 2020 holiday season," the statement added.
Sussberg noted that JC Penney intends to seek approval on the transaction beginning in early October.
As part of its bankruptcy reorganization, JC Penney said it planned to permanently close nearly a third of its 846 stores in the next two years, which would leave the retailer with just over 600 locations.
Reuters was first to report the deal.
The Associated Press contributed to this report.