| Item 1.01. | Entry into a Material Definitive Agreement. |
As previously reported, on May 15, 2020, J. C. Penney Company, Inc. (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”).
Also as previously reported, on June 8, 2020, J. C. Penney Corporation, Inc. (“JCP”), as borrower, the Company and certain of its subsidiaries (together with JCP and the Company, the “Credit Parties”), as guarantors, entered into a Superpriority Senior Secured Debtor-In-Possession Credit and Guaranty Agreement (the “DIP Credit Agreement”) with the financial institutions identified therein as lenders (the “DIP Lenders”), GLAS USA LLC, as administrative agent, and GLAS Americas LLC, as collateral agent. Capitalized terms used, but not otherwise defined, in this Item 1.01 have the meanings given to them in the DIP Credit Agreement.
In connection with the consummation of the OpCo 363 Sale (as defined below), on December 7, 2020, the Credit Parties and the DIP Lenders (other than Non-Voting Roll-Up Lender with respect to Non-Voting Roll-Up Loans) entered into a Limited and Specific Waiver to the DIP Credit Agreement (the “DIP Credit Agreement Waiver”) to, among other things, (i) extend the maturity of the DIP Credit Agreement to April 1, 2021, (ii) waive certain reporting requirements of the Company and JCP thereunder, (iii) eliminate certain other covenants no longer applicable to the Credit Parties, (iv) waive any accrual of any interest on the loans under the DIP Credit Agreement from and after December 7, 2020 (the “Effective Date”), and (v) waive any defaults or events of default, including those that may be deemed to arise as a result of the consummation of the OpCo 363 Sale, that may have arisen on or prior to the Effective Date, in each case, subject to the terms and conditions set forth therein. The foregoing description of the DIP Credit Agreement Waiver does not purport to be complete and is qualified in its entirety by reference to the copy of the DIP Credit Agreement Waiver filed herewith as Exhibit 10.1 and incorporated herein by reference
In addition, on December 7, 2020, in connection with the consummation of the OpCo 363 Sale, JCP and certain of the Company’s other subsidiaries entered into the Master Leases (as defined below) and the Company entered into the Transition Services Agreement (as defined below). The information under Item 2.01 below with respect to the Master Leases and the Transition Services Agreement is incorporated by reference into this Item 1.01. The description of the Master Leases and the Transition Services Agreement do not purport to be complete. The description of the Master Leases is qualified in its entirety by reference to the copies of the Store Master Lease and DC Master Lease (each as defined below) filed herewith as Exhibits 10.2 and 10.3, respectively, and incorporated herein by reference. The description of the Transition Services Agreement is qualified in its entirety by reference to the copy of the Transition Services Agreement filed herewith as Exhibit 10.4 and incorporated herein by reference.
| Item 2.01. | Completion of Acquisition or Disposition of Assets. |
As previously reported, on October 28, 2020, the Company, together with certain of its subsidiaries (collectively, the “Sellers”), entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Copper Retail JV LLC, an entity formed by and under the joint control of Simon Property Group, L.P. and Brookfield Asset Management Inc. (“OpCo Purchaser”), and Copper Bidco LLC, an entity that is controlled by the DIP Lenders and the other holders of the Debtors’ first lien debt (“PropCo Purchaser” and, together with OpCo Purchaser, the “Purchasers”). Pursuant to the Asset Purchase Agreement, as part of a credit bid by GLAS USA LLC, as administrative agent under the DIP Credit Agreement, and Wilmington Trust, National Association, as first lien agent, at the direction of a majority of the Debtors’ first lien creditors, the Purchasers agreed to acquire substantially all of the Sellers’ assets and assume certain of the Sellers’ obligations associated with the purchased assets.
Pursuant to the terms of the Asset Purchase Agreement, on December 7, 2020, the Sellers completed their sale (the “OpCo 363 Sale”) to one or more newly formed subsidiaries of OpCo Purchaser (collectively, the “Opco”) of substantially all of the retail and operating assets (other than the PropCo Properties described below) of the Company and its subsidiaries (collectively, the “Company Parties”). Pursuant to the OpCo 363 Sale, OpCo Purchaser also assumed certain liabilities related to such assets. The Sellers received, among other things, a cash payment of approximately $1 billion (which amount is subject to post-closing adjustments) and a portion of the credit bid (which portion PropCo Purchaser assigned to OpCo Purchaser for certain consideration set forth in the Asset Purchase Agreement immediately prior to the consummation of the OpCo 363 Sale). The OpCo 363 Sale was conducted under the provisions of Section 363 of the Bankruptcy Code and approved by the Bankruptcy Court. The Company anticipates that there will be no proceeds from the OpCo 363 Sale available for distribution to the Company’s common stockholders.
Pursuant to the Asset Purchase Agreement, the Debtors, on behalf of PropCo Purchaser, will form a trust and separate property holding companies (the “PropCos”), to be owned by such trust through which PropCo Purchaser will acquire certain of the Company Parties’ owned and ground leased real estate assets consisting of 160 retail stores (the “Stores”) and all six of its owned distribution centers (the “DCs” and, together with the Stores, the “PropCo Properties”) for the benefit of the Lenders. Such acquisition by PropCo Purchaser (the “PropCo Sale”) is subject to specified closing conditions and is expected to be consummated in 2021.
In connection with the consummation of the OpCo 363 Sale and pursuant to the Asset Purchase Agreement, on December 7, 2020, to provide for OpCo’s use of the PropCo Properties, (i) JCP, J. C. Penney Properties, LLC and JCPenney Puerto Rico, Inc., collectively as landlord, and Penney Tenant I LLC, a subsidiary of OpCo Purchaser, as tenant, entered into a “triple-net” master lease (the “Store Master Lease”), pursuant to which the tenant will lease the Stores, and (ii) JCP and J. C. Penney Properties, LLC, collectively as landlord, and Penney Tenant II LLC, a subsidiary of OpCo Purchaser, as tenant, entered into a “triple-net” master lease (the “DC Master Lease”
