Brookfield and Simon Property Group Swoop in on JCPenney

Posted on 09/10/2020

Down to the wire, J.C. Penney Company, Inc. reached an agreement in principle to sell JCPenney through a court-supervised sale process. J.C. Penney plans to seek approval of a disclosure statement and, ultimately, confirmation of a plan of reorganization in parallel with the sale process. Related to the sale process, JCPenney expects to execute a “stalking horse” asset purchase agreement, which will track an executed letter of intent. Essentially Brookfield Property Group and Simon Property Group intend to acquire substantially all of JCPenney’s retail and operating assets for US$ 1.75 billion, which includes a combination of cash and new term loan debt.

The agreement contemplates the formation of a separate real estate investment trust and a property holding company, which will include 161 of the J.C. Penney’s real estate assets and all of its owned distribution centers. The PropCos will be owned by J.C. Penney’s Ad Hoc Group of First Lien Lenders. The Operating Company and PropCos will enter into a master lease with respect to the properties and distribution centers moved into the PropCos.

“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 JCPenney to build on our over 100-year history,” said Jill Soltau, chief executive officer of JCPenney in a press release. “The interest in our operations reflects our Company’s strength and our loyal customer base. It is a testament to the hard work and dedication of our talented associates and the progress we have made in implementing our Plan for Renewal to Offer Compelling Merchandise, Drive Traffic, Deliver an Engaging Experience, Fuel Growth, and Build a Results-Minded Culture.”

As previously announced, JCPenney entered into a restructuring support agreement with lenders holding approximately 90 percent of its first lien debt to reduce the company’s outstanding indebtedness and strengthen its financial position. To implement the financial restructuring plan, the company filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

J.C. Penney is also in talks with Wells Fargo for US$ 2 billion in new financing. In May 2020, Brookfield disclosed it was planning on spending US$ 5 billion to save U.S. retailers impacted by COVID-19.


Kirkland & Ellis LLP is serving as legal adviser, Lazard is serving as financial adviser, and AlixPartners LLP is serving as restructuring adviser to the Company.

Keywords: Brookfield Asset Management.

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