American mall owners Simon Property Group and Brookfield Property Partners are about to finalize an $800 million deal to rescue the embattled department store chain JC Penney from bankruptcy. They will pay roughly $300 million in cash and assume $500 million in debt,
Wells Fargo has also agreed to give Penney $2 billion in revolving credit once the transaction is completed, leaving the retailer with $1 billion in cash Penney plans to seek approval from the bankruptcy judge for this rescue deal early next month.
Meantime, the hedge funds and private equity firms that have financed Penney’s bankruptcy are set to take ownership of some stores and the retailer’s distribution centers, in exchange for forgiving some of Penney’s $5 billion debt load. Penney’s lenders, led by H/2 Capital Partners, are going to own those assets in two different real estate investment trusts, or REITs.
Hit hard by the COVID-1 pandemic, leading to mounting debts, Penney filed for Chapter 11 bankruptcy protection in May. It had nearly 850 locations at the time.
Dozens of other retailers, including the department store chains Neiman Marcus, Stage Stores and Lord & Taylor, have filed for bankruptcy protection during the COVID-19 crisis. Some retailers have not found buyers to rescue them. Lord & Taylor, the oldest department store operator in the nation, and the home goods chain Pier 1 Imports are in the process of liquidating.