Scott Milne | Cnbc
American mall owners Simon Property Group and Brookfield Property Partners are close to finalizing a $ 800 million deal to save bankrupt department store chain Jessie Penney, to avoid total liquidation and save 70,000 jobs and 650 stores , Joshua Sasberg & Ellis of the law firm Kirkland said on Wednesday.
Simonberg said during a court hearing that Simon and Brookfield would pay about $ 300 million in cash and take a $ 500 million debt.
Wells Fargo has also agreed to give Penny $ 2 billion in revolving credit after the transaction was completed, leaving the retailer $ 1 billion in cash. Penny plans to seek approval from the bankruptcy judge for this rescue deal early next month.
Meanwhile, hedge funds and private-equity firms have determined to take ownership of some of the shops and retailers’ distribution centers in exchange for forgiving Penny’s $ 5 billion debt load for Penny’s bankruptcy. Peberg’s lenders, led by H / 2 Capital Partners, own those assets in two separate real estate investment trusts or REITs.
Hit hard by the coronovirus epidemic and swallowed up by an excess of debt, Penny filed for Chapter 11 bankruptcy protection in May. At that time it had about 850 locations.
Dozens of other retailers, including department store chains Neiman Marcus, Stage Stores and Lord & Taylor, have filed for bankruptcy protection during the Kovid-19 crisis. Some retailers have not found buyers to protect them. Lord & Taylor, the country’s oldest department store operator and home-goods chain Pier 1 Imports, is in the process of liquidating.
Negotiations to save Penny have been going on for weeks. During the August 31 hearing, Kirkland & Ellis Sausberg stated that negotiations were not taking place with the top bidder involved in Penny’s landlords. Instead, Penny’s lenders were going to prepare to make a credit bid themselves as a stand-alone company, a retail company, he said at the time.
Penny’s revenue and market value have plummeted over the years, allowing shoppers to at least visit its stores and shop online instead. It recorded net sales of $ 10.7 billion in 2019, up from $ 12.6 billion in 2015.
Sausberg has also previously stated that Penny’s unpublished real estate was valued at $ 1.4 billion when it lights up, and $ 704 million when they are dark. Over time the value of the retailer’s real estate has fallen, especially during epidemics, as the desire for heavily anchored locations in malls is less and less frequent.
Any deal by Simon and Brookfield is still subject to court approval and competitive bids.
Simon has already entered into deals this year to save the men’s suit maker Brooks Brothers and is working closely with apparel licensing firm Authentic Brands Group to save retailer Lucky Brand from bankruptcy. It first saved Forever 21, together with ABG and Brookfield. In May, Brookfield said it was planning to spend $ 5 billion to save retailers from the epidemic.
Analysts have said that due to a number of reasons, mall owners may look to protect Penny from having multiple empty department stores in their malls, potentially triggering so-called co-tenancy clauses that would make other retailers in the mall their Allow to reconstruct. Own lease or vacant. Owner Penny would also give Simon and Brookfield the ability to reuse their own real estate more easily, something Penny should close in her mall.
Representatives from Simon and Brookfield did not immediately respond to CNBC’s requests for comment.