After the JC Penney Co. store on the top of the mountain closed, an empty parking lot was seen. Juliet, Tennessee, Thursday, April 16, 2020.
Luke Sharet | Bloomberg | Getty Images
JC Penney will lay off about 1,000 employees because it has a plan with lenders to get out of bankruptcy.
The troubled retailer applied for court protection on May 1
To tie in with the shrinking store base, JC Penney said on Wednesday that it will lay off about 1,000 workers, whose positions include corporate and international positions. These workers will receive a welfare package that includes severance payments and medical insurance for eligible employees.
Jill Soltau, CEO of JC Penney, said in a statement: “These decisions are always extremely difficult, and I want to thank these colleagues for their hard work and dedication.” We are committed to supporting them during the transition period.”
At the same time, it continues to negotiate the future with lenders.
On Tuesday, JC Penney confirmed in court documents that it had reached an agreement with its lenders to postpone the critical deadline originally imposed on it as part of the bankruptcy financing. According to the terms of its debtor’s debt financing agreement, it must submit a business plan to its lenders by July 8 and add two-thirds of its members to the board by July 15. If these deadlines are missed, the process of selling their assets could have begun.
Now, after submitting the business plan on time, JC Penney must review with the lender before July 31 and evaluate potential buyers of the business. This gives it about two weeks to discuss a transaction to help avoid liquidation.
According to people familiar with the matter, according to the retailer’s secretly submitted plan last week, the retailer hopes to put its remaining about 160 stores into a real estate investment trust fund to collect checks from the retail business. Doing so gives investors the opportunity to invest in the company’s best real estate while keeping its basic retail business independent.
Penny said in court documents that it can sell up to 35% of the shares of the newly created REIT to third-party investors to raise cash or provide more funds for REITs.
JC Penney has negotiated with multiple suitors of all or part of its business. People familiar with the matter told CNBC that it included Sycamore Partners, a private equity firm that owns department store Belk, as well as a partnership between Simon Property Group, Brookfield Properties and Barneys New York parent company Authentic Brands.
An analysis shows that Simon, the largest shopping center owner in the United States, has Penney stores in about 50% of shopping centers in the United States. The divestiture of real estate investment trusts will allow Simon to purchase real estate investment trusts or invest in existing stores in its malls without having to invest in retail business.
Nonetheless, the leases in REITs should be liable to any investor because they depend on the tenant’s ability to pay rent. Searits Growth Real Estate Investment Trust (Seritage Growth Properties), which was divested in 2015, fell more than 74% this year, because investors are worried that it may not have enough funds to sell Sears’ one-time stores Transform into new real estate.
As the pandemic put pressure on the real estate and retail industries, the shares of Marcelich, Simon, CBL and Washington Prime Minister Group all fell more than 50% this year. CBL is talking to its lenders after outstanding debts and warned that it may not be able to continue operations.
People demand anonymity because the plan is confidential. Sycamore Partners declined to comment.