J.C. Penney receives approval for plan to create separate PropCos
As Texas-based department store retailer J.C. Penney Company, Inc. continues on its path out of bankruptcy, it has received court approval for a restructuring plan involving the creation of separate property holding companies (PropCos).
J.C. Penney filed for Chapter 11 bankruptcy with close to $5 billion in debt in May of this year, when the Covid-19 pandemic exacerbated existing problems at the department store chain. The retailer had been struggling in recent years due to the increasing popularity of online shopping.
The company’s turbulent bankruptcy proceedings have been characterized by disagreements between lenders. However, at the beginning of the month, the retailer’s lawyers were finally able to establish a settlement with a majority of its creditors, who agreed to support a sale of the company.
Following the settlement, J.C. Penney announced that it had received court approval for its rescue deal on November 10. The plan will see mall operators Simon Property Group and Brookfield Property Partners acquire the company’s remaining retail operations for $1.75 billion in cash and debt, while another group of lenders have agreed to forgive $1 billion in debt in exchange for 160 properties and six distribution centers.
Obtained from the U.S. Bankruptcy Court for the Southern District of Texas on November 25, the approval for the creation of separate PropCos is an important step in accomplishing the second part of this deal.
Upon completion of the plan, the PropCos will be owned and operated by J.C. Penney’s DIP and first lien lenders.
Recent reports from Dallas-based sources, including NBC's local affiliate, suggest that, as it seeks to cut costs on its road out of bankruptcy, the retailer has also vacated its headquarters in Plano, Texas. J.C. Penney is yet to confirm these reports.
Looking to the future, the company expects to emerge from Chapter 11 bankruptcy later this month, while the PropCos should complete their own court-supervised restructuring process in the first half of 2021.
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