J.C. Penney Says One Step Closer To Exit Chapter 11 Before Holiday Season

(RTTNews) - J.C. Penney said it is near to exiting Chapter 11 ahead of the busy December 2020 holiday season. The beleaguered retailer filed a draft asset purchase agreement towards finalization of the acquisition by Brookfield Asset Management, Inc. and Simon Property Group, Inc.

They are expected to buy substantially all of J.C. Penney's retail and operating assets in a combination of cash and debt.

Once the agreement is reached, it will be subject to Court approval and other closing conditions. A hearing to seek Court approval for the transaction is expected to be scheduled for early November.

The sale is expected to close in advance of the December 2020 holiday season if Court approves and the closing conditions in the agreement are met. J.C. Penney's operating assets will then conduct business outside of the Chapter 11 process under the J.C. Penney banner with Simon and Brookfield as its owners.

Like majority of retailers across the country, J.C. Penney has been forced to close stores for months due to the lockdown restrictions amidst the ongoing coronavirus (COVID-19) pandemic that hurt their sales.

Even before the pandemic outbreak, slowing foot traffic amid the ever-increasing online competition from industry majors and the changing consumer habits had led to many retailers shuttering stores and seeking bankruptcy protection.

J.C. Penney finally filed for bankruptcy protection in mid-May, citing the impact of unprecedented COVID-19 pandemic on its business. It entered into a restructuring support agreement with lenders of its first lien debt to reduce its outstanding debts and strengthen its financial position.

In the same month, Neiman Marcus Group Inc., J.Crew Group Inc. and Stage Stores Inc. also filed for bankruptcy protection. Others who followed suit include America's oldest apparel retailer Brooks Brothers and the oldest US department store Lord & Taylor. Ascena retail group, Inc., which owns Ann Taylor, LOFT, Lane Bryant, Stein Mart and Justice brands, also had filed for Chapter 11 bankruptcy.