J.C. Penney Settles With Lender Group Ahead of Sale Hearing

J.C. Penney and its majority first-lien lenders have reached a settlement with the retailer’s minority first-lien lender group, setting the stage for a bankruptcy sale hearing that is now scheduled for Nov. 9.

The parties revealed the settlement agreement, which was negotiated through the course of a parallel mediation process, ahead of a sale hearing originally scheduled for Monday afternoon. The settlement agreement still needs the Texas bankruptcy court’s formal approval. 

The agreement would resolve objections in recent weeks that were raised by the retailer’s first-lien minority lender group, which includes Aurelius Capital Management LP, Bank of America N.A. and others, to aspects of Penney’s planned sale. 

Over the past few months the retailer has been negotiating a planned going-concern sale that would divide the enterprise into a property business and an operating company, a complex sale that attorneys for the parties have told the court has taken several weeks of round-the-clock negotiations to come together.

Under the terms of the deal, which were firmed up in an asset purchase agreement last month, landlords Simon Property Group and Brookfield Property would take over the operating company that would comprise Penney’s retail business. Its majority lender group, which put in an overarching credit bid, would take over the real estate property business. 

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Under the terms of the planned sale, the landlords would lease locations from the Prop Co. through a master lease agreement, the details of which are still being finalized, Penney’s said in a filing Monday. In light of the developments, U.S. Bankruptcy Judge David Jones agreed to the parties’ motion to delay the sale hearing by a week, to Nov. 9. 

“JCP, Simon and Brookfield, and the majority lenders continue to finalize the master lease agreement documentation to reflect the previously agreed upon resolution of all open business issues through mediation with Judge Isgur,” the retailer wrote in its filing on Monday. 

“Now, with widespread consensus and all regulatory approvals in hand, JCP stands ready to move forward and effectuate a value-maximizing reorganization well ahead of the holidays.” 

A representative for J.C. Penney declined to comment beyond the filing, and attorneys for the first-lien minority group did not immediately comment. 

On Monday, Penney’s said it also reached an agreement with the Unsecured Creditors’ committee that would address any of its objections to the sale. 


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