An empty parking lot is seen outside a closed JC Penney Company store in Mt. Juliet, Tennessee, on Thursday April 16, 2020.
Luke Sharrett | Bloomberg Getty Images
JC Penney will lay off about a thousand employees as it prepares a plan with its lenders to emerge from bankruptcy.
The struggling retailer filed for court protection on May 15, with approximately 860 stores and about 90,000 full-time and part-time employees. It has announced plans to close about 170 stores in recent weeks, although negotiations with landlords are ongoing. On Wednesday, it said 152 closures are currently expected.
To match its shrinking store-base, Jessie Penney said on Wednesday that it would lay off about 1,000 employees, including corporate and international positions. Those workers will receive a benefit package that includes severance and health care coverage for eligible colleagues.
“These decisions are always extremely difficult, and I would like to thank these colleagues for their hard work and dedication,” JC Penney CEO Jill Saltou said in a statement. “We are committed to supporting them during this period of transition.”
Meanwhile, negotiations with its lenders for the future also continue.
On Tuesday, JC Penney confirmed in a court filing that it had struck a deal with its lenders to push back a major deadline originally imposed on it as part of its bankruptcy financing . According to the terms of its debtor-in-possession financing agreement, it was required to submit a business plan to its creditors by 8 July and receive two-thirds of the board by 15 July. If it did not remember those deadlines, it would have been. Starting the process of selling your assets.
Now, after confidentially submitting his business plans on time, Jessie Penney reviewed them with his lenders by July 31 and evaluated potential buyers for the business. This gives it about two more weeks to deal with to help avoid liquidity.
As per the plans submitted confidentially by the retailer last week, it wants to keep about 160 of its remaining stores in the real estate investment trust to collect checks from the retail business, people familiar with the situation said. Doing so gives investors the opportunity to invest in the company’s best real estate, keeping their underlying retail business separate.
Penny states in court documents that a 35% stake in a newly created REIT can be sold to raise cash, or to provide additional funding for the REIT.
Jessie Penny is negotiating with many suitors for all or part of his business. They include private equity firm Cycamore Partners, which owns the department store Belk, 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 owner of the nation’s largest mall, owns a Penny store in about 50% of its US malls, based on an analysis. REIT engraved, Simon could either buy REITs or invest in stores that are already in his mall without permission to invest in Simon Retail.
Nevertheless, leases in REITs are an obligation for any investor because they are dependent on the tenants’ ability to pay the rent. The REIT that Sears closed in 2015, Cerritridge Growth Properties, has fallen more than 74% this year, as investors worried that the one-time Sears store might not get enough capital to convert to new properties.
And as the epidemic pressures the real estate and retail industry, shares of Macerich, Simon, CBL and Washington Prime Group have all stumbled 50% or more this year. CBL is in the midst of talking with its own lenders after the loan repayment and warned that it may not be able to continue operating.
People requested anonymity because the plans are confidential. Sycamore Partners declined to comment.