An empty parking lot is seen outside a closed JC Penney Co. store on Mt. Juliet, Tennessee, Thursday, April 16, 2020.
Luke Sharrett | Bloomberg | fake pictures
JC Penney will fire nearly 1,000 employees as he works out a plan with his lenders to emerge from bankruptcy.
The struggling retailer applied for court protection on May 15, with approximately 860 stores and approximately 90,000 full-time and part-time employees. It has announced plans to close some 170 stores in recent weeks, although negotiations with the owners are ongoing. On Wednesday, he said about 152 closings are currently expected.
To coincide with the shrinking of its store base, JC Penney said Wednesday it will lay off about 1,000 workers, in roles that include corporate and international positions. Those workers will receive a benefits package that includes severance pay and health care coverage for eligible associates.
“These decisions are always extremely difficult, and I would like to thank these associates for their hard work and dedication,” said Jill Soltau, CEO of JC Penney, in a statement. “We are committed to supporting them during this transition period.”
Meanwhile, he also continues to negotiate a future with his lenders.
On Tuesday, JC Penney confirmed in a court filing that he had reached an agreement with his lenders to delay a key term originally imposed as part of his bankruptcy financing. Pursuant to the terms of his debtor-in-possession financing agreement, he had to submit a business plan to his lenders by July 8 and get two-thirds of them on board by July 15. If you had not met these deadlines, you would have had to start the process of selling your assets.
Now, after confidentially filing his business plans on time, JC Penney has until July 31 to review them with his lenders and evaluate potential buyers for the business. That gives you about two more weeks to come to an agreement to help you avoid liquidation.
Under plans the retailer confidentially unveiled last week, it wants to place approximately 160 of its remaining stores in a real estate investment trust to collect checks from the retail business, people familiar with the situation said. By doing so, investors have the opportunity to invest in the best real estate of a company while keeping their underlying retail business separate.
Penney has said in court documents that he could sell up to a 35% stake in the newly created REIT to an outside investor to raise cash or provide additional funds for the REIT.
JC Penney has been in talks with multiple suitors for all or part of his business. They include private equity firm Sycamore Partners, which owns Belk department store, and a partnership between Simon Property Group, Brookfield Properties and Barneys New York parent company Authentic Brands, people familiar with the situation told CNBC.
Simon, the largest mall owner in the country, owns a Penney store in about 50% of its U.S. shopping centers, according to an analysis. A REIT exclusion would allow Simon to buy the REIT or invest in the stores already in its shopping centers, without having to invest in the retail business.
Still, leases in the REIT are a responsibility for any investor, as they depend on the tenants’ ability to pay the rent. The REIT that Sears came off in 2015, Seritage Growth Properties, has fallen more than 74% this year as investors fear it may not be able to raise enough capital to turn unique Sears stores into new properties.
And as the pandemic puts pressure on the real estate and retail sector, shares of Macerich, Simon, CBL, and the Washington Prime Group have fallen 50% or more this year. CBL is in the midst of talks with its own lenders after debt payments are missing and warned that it may not be able to continue operating.
People requested anonymity because the plans are confidential. Sycamore Partners declined to comment.
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