By Maria Halkias
The Dallas Morning News
J.C. Penney has a lifesaving deal to come out of Chapter 11 as an operating department store chain. Simon Property Group and Brookfield Property Partners have agreed to purchase the Plano, Texas-based retailer for $1.75 billion in debt and equity.
Simon and Brookfield are landlords to a total of 160 of J.C. Penney stores. The deal was announced this afternoon in U.S. Bankruptcy Court by Penney’s lawyer, Josh Sussberg of Kirkland & Ellis.
He didn’t provide many details, saying the letter of intent and other parts of the agreement will be filed with the bankruptcy court by Thursday morning, he said.
Penney’s lenders are in agreement, Sussberg said.
Penney filed for Chapter 11 in May and negotiations dragged in recent weeks with potential buyers after a plan of reorganization was agreed to with its lenders.
The threat of a liquidation became more serious as no buyer emerged. Penney’s lenders, led by H/2 Capital Partners, had said on Aug. 31 that they were preparing their own initial bid for the company so that a court auction could proceed.
Penney is being split up into an operating company that will run the department stores and two real estate investment trusts.
One REIT will own stores and the other will own Penney’s distribution centers.
The operating company will enter into lease agreements with the publicly traded REITs.
Wells Fargo has agreed to extend Penney $2 billion in revolving credit, and when the transaction is completed, Penney will be left with $1 billion in cash.
More than 70,000 jobs may be saved by the transaction. Penney has already closed about 150 stores as part of its reorganization, and more closings are likely. Penney entered bankruptcy with 846 stores.
Simon and Brookfield have been part of the negotiations all summer.
The two landlords have been active buyers of retailers in bankruptcy.
Simon was part of a group that bought Forever 21 out of Chapter 11 in February and more recently Brooks Brothers in a joint agreement with Authentic Brands.