JC Penney considers exit from bankruptcy

NEW YORK – JC Penney believes he will step out of bankruptcy protection before Christmas under a new property deal that would save tens of thousands of jobs.

The besieged century-old retailer said on Wednesday it had filed a proposed asset purchase agreement with the two largest mall owners in the United States. Substantially all of JC Penney’s retail and operating assets will be acquired by Brookfield Asset Management Inc. and Simon Property Group through a combination of cash and new term loans.

Details of the deal that is supposed to save around 70,000 jobs and prevent a total liquidation first emerged last month during a bankruptcy hearing.

JC Penney, who even before the pandemic struggled to compete with Amazon.com, Target and Walmart, has become one of the largest retailers to seek Chapter 11 bankruptcy this year amid a wave of store closures forced by spread of covid-19 infections in the United States

More than two dozen retailers have filed for bankruptcy since the pandemic has closed stores, restaurants, gyms and other businesses across the country.

The Plano, Texas retailer will cut nearly a third of its stores over the next two years as it restructures, leaving just 600 locations open.

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On Tuesday, the company also revealed for the first time that the new owners of the 118-year-old department store chain will cede Penney’s defined benefit pension plan to the federal program that insures it. Other retiree health and life insurance benefits were also rejected under the contract of sale.

The move affects more than 52,000 current and future retirees who are vested in the plan.

At the end of last year, the plan had assets of $ 3.467 billion and its accrued benefit obligation was $ 3.2 billion. Penney’s Defined Benefit Plan is fully funded and insured by Pension Benefit Guaranty Corp., which will assume the assets of the plan and the responsibility for paying benefits to retirees.

The federally chartered guarantee company has capped monthly pension payments, but it’s not clear from various formulas how the Penney monthly pension will be affected. Some formerly very well paid executives may see their monthly pension checks shrink.

The rejection of the plan came as no great surprise, but it is another area of ​​concern for retirees and Penney employees. Penney had lucrative retirement benefits, including supplemental plans that were not insured by the company. Current and former employees have filed claims with the bankruptcy court regarding these uninsured pension funds.

Separately, 160 stores and six distribution centers that Penney owns go to its secured lenders led by H / 2 Capital. Another group of debt holders led by Aurelius Capital Management could also bid for these real estate assets.

Penney will lease all 160 stores and six distribution centers in what US bankruptcy judge David Jones has called “one of the longest and most complex leases known to man.”

The court has scheduled a confirmation of charges hearing for two days before Thanksgiving on November 24.

Information for this article was provided by Associated Press staff and Maria Halkias of The Dallas Morning News.

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