NEW YORK -- J.C. Penney is on course to emerge from bankruptcy by Thanksgiving, after a U.S. bankruptcy court approved the sale of the 118-year-old retailer to its two largest landlords and its primary lenders.
The U.S. Bankruptcy Court for the Southern District of Texas approved a purchase agreement, announced earlier this fall, under which substantially all of J.C. Penney's retail and operating assets are being acquired by Brookfield Asset Management Inc. and Simon Property Group through a combination of cash and new term-loan debt. The approval followed a lengthy court hearing on Monday.
Still, the retailer faces an uphill battle to attract shoppers this holiday season as they stay away from malls and stores for safety reasons and shop online more. Meanwhile, Amazon and big discounters such as Walmart and Target are only getting stronger as they offer low prices and one-stop shopping.
Details of the deal, which is supposed to save roughly 70,000 jobs and avert a total liquidation, first emerged in September during a bankruptcy hearing.
J.C. Penney filed for Chapter 11 bankruptcy protection in May, becoming one of the largest retailers to do so amid a wave of store closures forced by the spread of covid-19 infections in the U.S.
More than two dozen retailers have filed for bankruptcy protection since the pandemic temporarily closed stores, restaurants, gyms and other businesses nationwide. Retailers are worrying about the effects on their businesses with a surge of new cases all over the country.
The Plano, Texas, chain will shed nearly a third of its stores in the next two years as it restructures, leaving just 600 locations open.
With no other valid offers in sight, Penney's fate was in the balance. Its financing agreement expires Monday, and the sale had to close by Nov. 20 to avoid the company going out of business.
"Our goal from the beginning of this process has been to ensure J.C. Penney will continue to serve customers for decades to come and this court approval accomplishes that objective," said Jill Soltau, chief executive officer of J.C. Penney, in a statement.
In September, the company disclosed that the new owners will turn over Penney's defined benefit pension plan to the federal program that insures it. Other retiree medical and life insurance benefits were also rejected under the sale agreement.
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 $3.467 billion in assets, and its accumulated benefit obligation was $3.2 billion. Penney's defined benefit plan is fully funded and is insured by the Pension Benefit Guaranty Corp., which will assume the plan's assets and the responsibility for paying benefits to retirees.
The federally chartered guaranty corporation has caps on monthly pension payouts, but it's not clear based on various formulas how the Penney monthly pension will be affected. Some formerly highly paid executives could see a reduction in their monthly pension checks.
Information for this article was contributed by Anne D'Innocenzio of The Associated Press and by Maria Halkias of The Dallas Morning News.