A J.C. Penney retailer in Laguna Hills, California
Scott Mlyn | CNBC
It seems like J.C. Penney is about to be rescued by its landlords.
U.S. mall homeowners Simon Property Group and Brookfield Property Partners are near finalizing an $800 million deal to rescue the embattled division retailer chain from chapter, avoiding a complete liquidation and saving about 70,000 jobs and 650 shops, Joshua Sussberg of the legislation agency Kirkland & Ellis mentioned Wednesday afternoon throughout a court docket listening to.
Simon and Brookfield pays roughly $300 million in money and assume $500 million in debt, Sussberg mentioned.
Meantime, the hedge funds and private-equity corporations which have financed Penney’s chapter are set to take possession of some shops and the retailer’s distribution facilities, in trade for forgiving a few of Penney’s $5 billion debt load. Penney’s lenders, led by H/2 Capital Companions, are going to personal these belongings in two completely different actual property funding trusts, or REITs, Sussberg mentioned. Penney’s landlords would then pay the lenders lease.
Hit exhausting by the coronavirus pandemic and swallowed by an overhand of debt, Penney filed for Chapter 11 chapter safety in Might. It had practically 850 places on the time.
Dozens of different retailers, together with the division retailer chains Neiman Marcus, Stage Shops and Lord & Taylor, have additionally been pushed to the brink and compelled to file in the course of the Covid-19 disaster. Some retailers haven’t discovered consumers to rescue them. Lord & Taylor, the oldest division retailer operator within the nation, is within the midst of liquidating for good. The house-goods chain Pier 1 Imports was additionally compelled to liquidate.
Talks to rescue Penney have been occurring for weeks. Throughout an Aug. 31 listening to, Kirkland & Ellis’ Sussberg mentioned talks with the highest bidder that consisted of Penney’s landlords weren’t going wherever. As an alternative, Penney’s lenders have been going to arrange to make a credit score bid to personal the retailer as a stand-alone firm, he mentioned that the time.
Any deal by Simon and Brookfield remains to be topic to court docket approval and competing bids.
Simon has already reached offers this 12 months to save men’s suit maker Brooks Brothers and denim retailer Fortunate Model from chapter, teaming up with the attire licensing agency Genuine Manufacturers Group to take action. It additionally beforehand teamed up with ABG and Brookfield to avoid wasting Perpetually 21. Brookfield in Might mentioned it was planning to spend $5 billion to save retailers hurt by the pandemic.
Analysts have mentioned, amongst various causes, the mall homeowners may very well be trying to save Penney to prevent from having multiple empty department stores at their malls, probably triggering so-called co-tenancy clauses that enable different retailers within the mall to renegotiate their very own leases or vacate. Proudly owning Penney would additionally give Simon and Brookfield the power to re-purpose their very own actual property extra simply, ought to some Penney shops of their malls shut.
This story is growing. Please examine again for updates.
