Item 7.01. Regulation FD.
As previously reported, on May 15, 2020, J. C. Penney Company, Inc. ("J. C.
Penney" or the "Company") and certain of its subsidiaries (together with the
Company, the "Debtors") commenced voluntary cases under chapter 11 of title 11
of the United States Code (the "Chapter 11 Cases") in the United States
Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court").
Prior to the commencement of the Chapter 11 Cases, on May 15, 2020, the Company
and its subsidiaries (together with the Company, the "Company Parties") entered
into a Restructuring Support Agreement (together with all exhibits and schedules
thereto, and as amended to date, the "RSA") with members of an ad hoc group of
lenders and noteholders (the "Ad Hoc Group").
Also as previously reported, on September 10, 2020, the Company entered into a
non-binding letter-of-intent ("LOI") with the Ad Hoc Group, Simon Property Group
("Simon") and Brookfield Property Group ("Brookfield") that is generally
consistent with the framework of the restructuring process contemplated in the
RSA. The parties to the LOI have been, and continue to be, in discussions
regarding the transactions contemplated by the LOI.
On October 20, 2020, the Company will file with the Bankruptcy Court a draft
asset purchase agreement (the "draft APA"), which was prepared with the other
parties to the LOI and which generally tracks the terms of the LOI, to sell
substantially all of the Company Parties' assets. The Company and the other
parties to the LOI are working to conclude negotiations and enter into a final
asset purchase agreement. Key terms of the draft APA are as follows: (i) Simon
and Brookfield will acquire substantially all of the Company Parties' retail and
operating assets ("OpCo") through a combination of cash and new term loan debt;
(ii) separate newly-formed property holding companies ("PropCo"), to be owned by
the lenders under the Company's Superpriority Senior Secured
Debtor-In-Possession Credit and Guaranty Agreement and the other holders of the
Debtors' first lien debt, will be formed and will hold 160 of the Company
Parties' real estate assets and all of their owned distribution centers; and
(iii) OpCo and PropCo will enter into master leases with respect to the
properties and distribution centers moved into PropCo. A copy of the draft APA
will be available at a website maintained by the Debtors' claim agent, Prime
Clerk, at http://www.cases.primeclerk.com/JCPenney. The draft APA is non-binding
and provides no guarantee that a transaction will be completed. The terms of any
potential transaction are subject to definitive documentation that must be
agreed upon by all parties and subsequently approved by the Bankruptcy Court.
To facilitate discussions with the Ad Hoc Group during the negotiations relating
to the draft APA, and in connection with discussions with certain other lenders,
noteholders and other creditors, the Company provided such persons with certain
non-public information subject to confidentiality agreements (collectively, the
"NDAs"). Pursuant to the NDAs, the Company agreed to publicly disclose certain
information (the "Cleansing Material") upon the occurrence of certain events set
forth in the NDAs. A copy of the Cleansing Material is attached to this Current
Report on Form 8-K as Exhibit 99.1.
The Cleansing Material was not prepared with a view toward public disclosure and
should not be relied upon to make an investment decision with respect to J. C.
Penney. The Cleansing Material should not be regarded as an indication that the
Company Parties or any third party consider the Cleansing Material to be a
reliable prediction of future events, and the Cleansing Material should not be
relied upon as such. The Cleansing Material includes certain values for
illustrative purposes only and such values are not the result of, and do not
represent, actual valuations, estimates, forecasts or projections of the Company
Parties or any third party and should not be relied upon as such. Neither the
Company Parties nor any third party has made or makes any representation to any
person regarding the accuracy of any Cleansing Material or undertakes any
obligation to publicly update the Cleansing Material to reflect circumstances
existing after the date when the Cleansing Material was prepared or conveyed or
to reflect the occurrence of future events, even in the event that any or all of
the assumptions underlying the Cleansing Material are shown to be in error.
The information disclosed in this Item 7.01, including Exhibit 99.1, is being
furnished and shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise
subject to the liabilities of that Section, nor shall it be deemed incorporated
by reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act, regardless of any general incorporation language in such a filing.
Additional Information on the Chapter 11 Cases
Court filings and information about the Chapter 11 Cases can be found at a
website maintained by the Debtors' claim agent, Prime Clerk, at
http://www.cases.primeclerk.com/JCPenney.
Cautionary Statement Regarding Forward-Looking Information
The Company has included statements in this Current
Report on Form 8-K that may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Words such as
"expect" and similar expressions identify forward-looking statements.
Forward-looking statements are based only on the Company's current assumptions
and views of future events and financial performance. They are subject to
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known and unknown risks and uncertainties, many of which are outside of the
Company's control that may cause the Company's actual results to be materially
different from planned or expected results. Those risks and uncertainties
include, but are not limited to, risks attendant to the bankruptcy process,
including the Company's ability to obtain court approval from the Bankruptcy
Court with respect to motions or other requests made to the Bankruptcy Court
throughout the course of the Chapter 11 Cases; the ability of the Company to
negotiate, develop, confirm and consummate a plan of reorganization; the effects
of the Chapter 11 Cases, including increased legal and other professional costs
necessary to execute the Company's reorganization, on the Company's liquidity
(including the availability of operating capital during the pendency of the
Chapter 11 Cases), results of operations or business prospects; the effects of
the Chapter 11 Cases on the interests of various constituents; the length of
time that the Company will operate under Chapter 11 protection; risks associated
with third-party motions in the Chapter 11 Cases; Bankruptcy Court rulings in
the Chapter 11 Cases and the outcome of the Chapter 11 Cases in general;
conditions to which any debtor-in-possession financing is subject and the risk
that these conditions may not be satisfied for various reasons, including for
reasons outside the Company's control; the ability of the parties to the LOI to
consummate the transactions contemplated therein; general economic conditions,
including inflation, recession, unemployment levels, consumer confidence and
spending patterns, credit availability and debt levels; changes in store traffic
trends; the cost of goods; more stringent or costly payment terms and/or the
decision by a significant number of vendors not to sell the Company merchandise
on a timely basis or at all; trade restrictions; the ability to monetize
non-core assets on acceptable terms; the ability to implement the Company's
strategic plan, including its omnichannel initiatives; customer acceptance of
the Company's strategies; the Company's ability to attract, motivate and retain
key executives and other associates; the impact of cost reduction initiatives;
the Company's ability to generate or maintain liquidity; implementation of new
systems and platforms; changes in tariff, freight and shipping rates; changes in
the cost of fuel and other energy and transportation costs; disruptions and
congestion at ports through which the Company imports goods; increases in wage
and benefit costs; competition and retail industry consolidations; interest rate
fluctuations; dollar and other currency valuations; the impact of weather
conditions; risks associated with war, an act of terrorism or pandemic; the
ability of the federal government to fund and conduct its operations; a systems
failure and/or security breach that results in the theft, transfer or
unauthorized disclosure of customer, employee or Company information; legal and
regulatory proceedings; the Company's ability to access the debt or equity
markets on favorable terms or at all; risks arising from the delisting of the
Company's common stock from the New York Stock Exchange; and the impact of
natural disasters, public health crises or other catastrophic events on the
Company's financial results, in particular as the Company manages its business
through the COVID-19 pandemic and the resulting restrictions and uncertainties
in the general economic and business environment. Please refer to the Company's
Annual Report on Form 10-K for the year ended February 1, 2020, and Quarterly
Reports on Form 10-Q filed subsequently thereto, for a further discussion of
risks and uncertainties. There can be no assurances that the Company will
achieve expected results, and actual results may be materially less than
expectations. Investors should take such risks into account and should not rely
on forward-looking statements when making investment decisions. Any
forward-looking statement made by the Company in this Current Report on Form 8-K
is based only on information currently available to it and speaks only as of the
date on which such statement is made. The Company does not undertake to update
these forward-looking statements as of any future date.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibit 99.1 Cleansing Material
Exhibit 104 Cover Page Interactive Data File - the cover page XBRL tags are
embedded within the Inline XBRL document
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