Oct 18, 2020
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About this Deal
J. C. Penney Company Inc. is mediating with Simon Property Group Inc. and Brookfield Property Partners LP, as well as a majority group of first lien lenders, in an effort to move toward a sale as it seeks to exit Chapter 11 proceedings ahead of the holiday shopping season.
A filing yesterday with the United States Bankruptcy Court for the Southern District of Texas showed that the bankrupt chain and the mall giants were engaged in mediation discussions with Judge Marvin Isgur. The parties are seeking to work out issues related to working capital, certain closing adjustments and key elements of the master lease agreement.
According to the document, the judge “believes that substantial progress is being made” in the negotiations. The court is set to hold a hearing next week to review the terms of the agreement, and a sale hearing is scheduled for Nov. 2.
“It is absolutely critical to these estates that the operating company sale move forward and be approved in early November,” the retailer’s counsel wrote. “JCPenney will do whatever it takes to ensure that happens.”
They added, “JCPenney has been and remains laser focused on saving over 60,000 jobs and maximizing the value of these estates through a going concern reorganization.”
The filing came on the same day a Bloomberg report suggested that talks between JCPenney, its lenders and the commercial real estate owners had fallen apart in recent days. The publication, which cited people with knowledge of the matter, added that the landlords missed several deal deadlines.
On Wednesday, the Plano, Texas-based company received a competing proposal from a minority group of first lien lenders. The proposal, read the court document, is being considered by the debtors.
FN has reached out to Simon and Brookfield for comment.
Last month, JCPenney announced that it had reached an agreement to sell its business to Simon and Brookfield. As part of the deal, the mall owners plan to acquire “substantially all of JCPenney’s retail and operating assets” for $1.75 billion, with a combination of cash and debt.
The deal is still expected to be completed ahead of the critical holiday shopping season, which is often considered the most important quarter for retailers. If it’s unable to reach an agreement within the next month, JCPenney’s creditors could find themselves saddled with unpaid debt stemming from massive holiday inventory orders — while JCP could face its own setbacks in securing such orders amid a protracted Chapter 11 case.
Competing with other retailers that hosted online shopping extravaganzas (most notably Amazon with Prime Day), JCPenney launched its Cyber Days event this week. Weekend sales — with Black Friday-like pricing — will be available throughout the month of November, while it will continue to offer markdowns in December.