November 9, 2020 – At a November 9th sale hearing (delayed from November 2nd), the Court hearing the J.C. Penney Company cases (i) authorized the Debtors to enter into their October 28th APA (defined immediately below) with Simon Property Group, Brookfield Property Group and certain debtor-in-possession ("DIP") and prepetition lenders and (ii) approved a pair of private sales to which the Debtors ascribe a $1.75bn enterprise value [Docket No. 1814].

On October 28th, the Debtors filed an executed asset purchase agreement (the "APA") relating to the sale of (i) their "OpCo" assets to Copper Retail JV LLC (an entity controlled by Simon Property Group and Brookfield Property Group, the “OpCo Purchaser”) and (ii) their "PropCo" assets to Copper BidCo LLC (a new entity to be owned by certain of the Debtors' DIP and first lien lenders, “BidCo” or the “PropCo Purchaser” and, together with the OpCo Purchaser, the “Purchasers”) [Docket No. 1668]. Filed with the executed APA were numerous transaction-related documents which are listed below.

Further to the terms of the APA, the OpCo Purchaser will purchase the Debtors’ operating assets and run the Debtors’ retail operations (“OpCo”) on a go-forward basis. OpCo will be the new employer of the Debtors’ associates, the counterparty to the Debtors’ vendor contracts, and the “tenant” on all store leases. 

Additionally, a newly-formed entity (“PropCo”) will hold 160 owned and ground-leased store properties and 6 distribution centers and will issue securities to the DIP Lenders and the First Lien Ad Hoc Group (the “PropCo Purchaser” and, together with the OpCo Purchaser, the “Purchasers”). At those locations, PropCo or its Affiliates will be the landlord to OpCo pursuant to the terms of a still being negotiated master lease agreement (the "Master Lease Agreement") which will govern the relationship between OpCo and PropCo.

In a November 9th press release, that focused on the PropCo sale and the expectation that the Debtors' retail assets will be up and running under new ownership in advance of the holiday selling season, the Debtors announced that: “The U.S. Bankruptcy Court for the Southern District of Texas (the ‘Court’) has approved the previously announced asset purchase agreement (‘APA’) with Brookfield Asset Management, Inc. (‘Brookfield’), Simon Property Group (‘Simon’) and the Company’s DIP and First Lien Lenders (‘First Lien Lenders’), which is supported by the Unsecured Creditors Committee. Pursuant to the APA, Brookfield and Simon will acquire substantially all of JCPenney’s retail and operating assets (‘OpCo’) through a combination of cash and new term loan debt. 

The OpCo transaction remains subject to additional closing conditions and is expected to close in late November 2020.”

Jill Soltau, the Debtors' Chief Executive Officer added: “With the 2020 holiday season in full swing, we are excited to operate under the new ownership of Brookfield and Simon outside of Chapter 11 and under the JCPenney banner.”

Key Terms of the APA:

OpCo Assets

• Sellers: J.C. Penney Company, Inc. and the subsidiaries of the Company indicated in the Asset Purchase Agreement.
• OpCo Purchaser: Copper Retail JV, LLC.
• Purchase Price: The aggregate consideration for the OpCo Acquired Assets shall be: (i) OpCo Credit Bid Amount [a portion of the $1.0bn of prepetition and DIP debt that can be credit bid by BidCo can be assigned to OpCo]; (ii) a cash payment (the “OpCo-Company Closing Date Payment”) equal to (1) $692,000,000 plus (2) the Payoff Amount [this to be determined figure to pay off ABL obligations and swap obligations], plus (3) 50% of the amount (if any) by which Estimated October EBITDA exceeds the Target October EBITDA, less (4) 50% of the amount (if any) by which Target October EBITDA exceeds Estimated October EBITDA, less (5) the Estimated Closing Cash, less (6) Proposed November Non-Operating Costs; less (7) one million dollars ($1,000,000); and (iii) assumption of the OpCo Assumed Liabilities.
• Break-Up Fee: If the Asset Purchase Agreement is terminated prior to the OpCo closing and pursuant to certain subsections of Section 8.1, the Company shall pay to OpCo Purchaser a breakup fee in an amount equal to $9,000,000 (the “Break-Up Fee”). The Break-Up Fee shall constitute an allowed super-priority administrative expense claim.

PropCo Assets

• Sellers: J.C. Penney Company, Inc. and the subsidiaries of the Company indicated in the Asset Purchase Agreement.
• PropCo Purchaser: Copper BidCo LLC.
• Purchase Price: The aggregate consideration for the PropCo Acquired Assets shall be: (i) PropCo Credit Bid Amount, consisting of a portion of the “Credit Bid Amount” (this comprised of $900.0mn of DIP Obligations and a total of $100.0mn of prepetition Term Loan Obligations and First Lien Notes Obligations); and (ii) the assumption of the PropCo Assumed Liabilities.

Transaction Documentation

The Debtors have filed the following documents [Docket No. 1682]: 

• that certain Patent Assignment Agreement as Exhibit B to the Asset Purchase Agreement 
• that certain Trademark Assignment Agreement as Exhibit C to the Asset Purchase Agreement 
• that certain Copyright Assignment Agreement as Exhibit D to the Asset Purchase Agreement 
• that certain Domain Name Assignment Agreement as Exhibit E to the Asset Purchase Agreement 
• that certain Form of Deed as Exhibit F to the Asset Purchase Agreement 
• that certain Assignment and Assumption of Lease as Exhibit G to the Asset Purchase Agreement
• that certain Credit and Guaranty Agreement, dated as of [], 2020, by and among [], asBorrower, [], as Holdings, Certain Subsidiaries of Borrower, as Guarantors, the Lenders Party Hereto from Time to Time, as Lenders, GLAS USA LLC, as Administrative Agent,and GLAS Americas LLC, as Collateral Agent, as Exhibit J to the Asset Purchase Agreement
• that certain Transition Services Agreement as Exhibit K to the Asset Purchase Agreement
• that certain Escrow Agreement as Exhibit L to the Asset Purchase Agreement
• that certain Earnout Agreement as Exhibit N to the Asset Purchase Agreement
• that certain Benefits Transition Services Agreement as Exhibit O to the Asset Purchase Agreement
• that certain amendment to the Restructuring Support Agreement reflecting the foregoing as Exhibit 3
• that certain direction letter described in the Asset Purchase Agreement as Exhibit 4

About the Debtors

J. C. Penney Company, Inc. (NYSE: JCP), one of the nation’s largest apparel and home retailers, combines an expansive footprint of approximately 850 stores across the United States and Puerto Rico with a powerful e-commerce site, jcp.com, to deliver style and value for all hard-working American families. At every touchpoint, customers will discover stylish merchandise at incredible value from an extensive portfolio of private, exclusive and national brands. Reinforcing this shopping experience is the customer service and warrior spirit of nearly 85,000 associates across the globe, all driving toward the Company’s mission to help customers find what they love for less time, money and effort.

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