"Preventing Bankruptcy" US Department Store JC Penney Likely to Reach Acquisition Agreement with Shopping Mall Owners

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunjin Jung] Simon Property Group and Brookfield Property Partners, owners of shopping malls, have extended a helping hand to JC Penney, the largest department store chain in the United States, which filed for bankruptcy in May due to financial difficulties caused by the novel coronavirus disease (COVID-19), enabling it to continue operations.

According to CNBC and other sources, JC Penney, Simon, and Brookfield are expected to soon reach an agreement worth approximately $800 million (about 950 billion KRW) to halt JC Penney's bankruptcy proceedings and acquire the company. Joshua Sussberg, JC Penney's attorney, appeared in bankruptcy court on the day and stated that through the agreement, the legal teams of Simon and Brookfield are currently collaborating to acquire JC Penney and are finalizing the deal. He added that they plan to submit this rescue plan to the bankruptcy court judge early next month and seek approval.

The attorney stated that Simon and Brookfield will pay about $300 million in cash to JC Penney and assume approximately $500 million in debt. Furthermore, once the transaction is completed, Wells Fargo is expected to provide JC Penney with a $2 billion revolving credit facility, and JC Penney itself will retain $1 billion in cash. He added, "We promise to move quickly and save JC Penney."

If the bankruptcy court approves this, the agreement is expected to allow JC Penney to maintain its operations. Foreign media such as the Associated Press described this agreement as a provisional deal to prevent JC Penney's bankruptcy. Accordingly, it is reported that about 70,000 JC Penney employees are unlikely to be laid off.

JC Penney had filed for bankruptcy due to financial difficulties caused by the impact of COVID-19. JC Penney is the largest department store chain in the United States with a history of 118 years and operates 846 stores nationwide. Under this agreement, about one-third of these stores are planned to be closed, and approximately 650 stores are expected to remain in operation. According to the agreement, Simon and Brookfield are expected to own 490 of the 650 JC Penney stores.

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