JCPenney emerges from Chapter 11

February 2021 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

February 2021 Issue

Following months of store closures, US department store chain JCPenney has emerged from Chapter 11 bankruptcy protection, having completed the sale of its retail and operating assets to Simon Property Group and Brookfield Asset Management, Inc.

The embattled retailer filed for Chapter 11 bankruptcy protection in May 2020, citing the struggles of the department store industry and the impact of the coronavirus (COVID-19) pandemic.

However, an asset purchase agreement (APA) with Simon and Brookfield, as well its debtor-in-possession (DIP) and first lien lenders, has been approved by the bankruptcy court. The court has also approved a plan of reorganisation to create separate property holding companies comprising 160 of JCPenney’s real estate assets and all of its owned distribution centres, which will be owned by the DIP and first lien lenders.

“We have accomplished our goal of putting JCPenney on a secure path for the future as a private company so that we can continue to serve our loyal customers,” said Jill Soltau, chief executive of JCPenney. “With this closing, our operating company has exited Chapter 11 and is continuing under new ownership and the JCPenney banner. This milestone would not be possible without the commitment and hard work of our associates and the support of our vendor partners.”

Furthermore, with the completion of the sale, JCPenney has access to approximately $1.5bn of new financing, including a new asset-based lending (ABL) facility – which was led by Wells Fargo – and a recently funded first-in, last-out (FILO) facility, led by Pathlight Capital.

“We have always been firm believers in JCPenney, and are very pleased to help preserve this iconic institution and save tens of thousands of jobs,” said David Simon, chairman, chief executive and president of Simon Property Group. “JCPenney is now poised for a future focused on innovation and consumers, while continuing to navigate through the pandemic. We are excited about JCPenney’s future growth and look forward to collaborating with the JCPenney team to serve its customers and communities.”

“We are excited to help lead the turnaround of a storied institution while saving tens of thousands of jobs and continuing to serve over 35 million customers,” said Brian Kingston, chief executive of real estate at Brookfield Asset Management. “This is exactly the type of investment our retail revitalisation programme was designed to make and along with our partner Simon we have a successful blueprint in place to deploy our collective operational expertise and industry relationships to transform JCPenney through new innovations and offerings.”

Serving as legal adviser to JCPenney is Kirkland & Ellis LLP, with Lazard serving as financial adviser and AlixPartners LLP as restructuring adviser. Paul, Weiss, Rifkind, Wharton & Garrison LLP is serving as legal counsel and BRG Capital Advisors, LLC is serving as financial adviser to Simon and Brookfield.

Dan Platt, chief executive of Pathlight Capital, concluded: “Pathlight is pleased to support JCPenney through their emergence and future growth. We are looking forward to working with the management team and new equity partners as they continue to implement their transformation strategy and focus on enhancing the shopping experience of their loyal customer base.”

Fraser Tennant