DJ J.C. Penney Is Selling Itself to Its Landlords -- Barrons.com
By Alexandra Scaggs
J.C. Penney stock more than doubled Wednesday afternoon, after news that it reached a preliminary deal with two of its largest landlords, who are seeking to buy the company.
Simon Property Group (SPG) and Brookfield Property Partners (BPY), real-estate companies that own more than 160 of the store's properties, have signed a letter of intent to purchase the company, said Kirkland & Ellis attorney Joshua Sussberg in a Wednesday court hearing.
The letter of intent, which is nonbinding, will be published late Wednesday, said Sussberg. J.C. Penney's lenders have also signed the letter subject to a couple of conditions, he added.
He laid out a broad outline for the deal at the hearing. Simon Property and Brookfield plan to make a $300 million equity infusion, while the company's bankruptcy lenders have tentatively agreed to a $500 million financing. Banks led by Wells Fargo plan to underwrite a $2 billion asset-backed loan, he said.
The total transaction "contemplates a $1.75 billion total enterprise," he said, with a "significantly negotiated working capital adjustment."
J.C. Penney "will have approximately $1 billion at close of the transaction, subject of course to the working capital adjustment and the payments of costs and expenses associated with the transaction," he said.
As previously reported, the transaction will split J.C. Penney into three companies, he said: one operating company to run the brand, one company to own the retailer's stores, and another to own its distribution centers. The news comes a little more than a week after negotiations between the buyers, the company and its lenders reached a standstill.
Sussberg said the retailer's senior lenders have agreed to the outlines of the deal as well. The parties hope to finalize the terms of the deal within the next 10 days, he said, and to seek the court's approval for a deal in October.
The stock was delisted in May. It more than doubled to 39 cents per share from 19 cents per share on Wednesday.
Write to Alexandra Scaggs at alexandra.scaggs@barrons.com
(END) Dow Jones Newswires
September 09, 2020 16:45 ET (20:45 GMT)
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