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J.C. Penney to Get Holiday Wish: New Owners and Bankruptcy Exit

Mass merchant J.C. Penney Co. Inc. on Tuesday got the verbal nod from the bankruptcy court for confirmation of its plan of reorganization.

The retailer’s disclosure statement was approved as well. A final order still needs to be signed by U.S. Bankruptcy Judge David Jones in Corpus Christi, Tex. There was a delay in the signing as attorneys in the case were working through acceptable language for the order.

At the hearing, Judge Jones said that the “plan does not discriminate unfairly and is fair and equitable” for each creditor class.

While some creditor groups will receive limited recovery, equity shareholders will find their shares canceled.

Also set to occur Wednesday, two days shy of Black Friday, is the closing of the sale of the company. As reported, the operational component of the bankrupt company—the business itself—will be owned by its two largest landlords, Simon Property Group and Brookfield Capital Partners. Both landlords had a requirement that the closing of the deal occur before the start of the holiday season.

The real estate assets of the bankrupt J.C. Penney, which is set to be owned by the majority of the retailer’s first-lien lenders, won’t close until the first half of 2021. That part of the bankruptcy process won’t have any impact on the business entity that’s being sold to Simon and Brookfield.

JCP filed for bankruptcy court protection on May 15.

So, what’s next for the mass merchant?

That’s hard to say. JCP exits bankruptcy as a new company. It gets the advantage of what is known as fresh-start accounting, a reset of its newly valued balance sheet now that some debt has been taken off. And it has new financing as well, which should provide a level of assurance to vendors because they’ll know that the retailer has the funding to pay its bills for new orders.

And the exit is a plus for the 118-year-old chain for another reason—in a world impacted by the coronavirus, the second chance it has post bankruptcy allows it to serve the communities where it has stores and keep over 60,000 of its staff employed.

But the continued existence of Covid presents its own set of challenges. One is whether all stores will temporarily have to close for a second time as infection rates are on the rise again.