Forever 21 Bailout Team May Rescue JCPenney

JCPenney may have a suitor. Reports circulating Tuesday (June 16) have Authentic Brands teaming with mall landlords Simon Property Group and Brookfield Properties teaming up to purchase the troubled retailer, which filed for bankruptcy on May 15.

JCP has until July 14 to file a bankruptcy exit plan, and this deal could be the bailout it’s looking for. JCPenney has already pledged to close 150 of its 800-plus stores. It would be the second deal this year for the Mall Owners-Authentic team, which bailed Forever 21 out of bankruptcy earlier this year. According to several sources, Authentic and Simon are also looking at Brooks Brothers Inc. on a joint bid that would be part of a potential bankruptcy filing Bloomberg News reported last week.

The current Authentic Brands portfolio is a mix of licensed fashion brands and retail. The fashion brands range from Elvis Presley to Frye to Fredericks of Hollywood. The retail brands include Forever 21, Aeropostale and Barneys. The JCP deal would put the buying team in two of the toughest areas of retailing in any time period: department stores and malls.

JCPenney’s value at this point includes its owned real estate and intellectual property from its private label brands, according to David Silverman, a retail analyst at Fitch Ratings. “The different companies that are potentially looking into J.C. Penney have different capabilities and options given the real estate that J.C. Penney has and the suitors’ potential use with it,” Silverman said.

“There would be some upsides to this potential buyout for J.C. Penney,” said Bloomberg. “The group’s rescue of Aeropostale is widely perceived as a success. And Brookfield had earlier pledged to put $5 billion toward helping retailers recover from the devastating effects of stay-at-home orders and a recession, a sign that J.C. Penney would be getting a partial owner that is deeply invested in saving not just the struggling retailer, but the entire mall ecosystem.”

Another major player in the mall ecosystem, outlet owner Tanger Factory Outlet Centers, reported an update on its operations on Tuesday. All 39 of the company’s properties are now open. As of June 14, open stores represented 72 percent of its total occupied stores in the consolidated portfolio. Weekly traffic exceeds 85 percent of 2019 levels. “At centers where in-store retail has been allowed for 30 days or more, weekly traffic exceeds 90 percent of prior year levels and open stores as a percentage of total occupied stores are approaching 90 percent,” said the company in a statement.

“As governmental mandates are lifted, we are encouraged to see retailers reopen their stores and pleased that traffic is returning to our centers. This demonstrates the durability of Tanger’s value proposition for retailers and for the consumer,” said Steven B. Tanger, chief executive officer.

On June 11, 2020, Tanger completed amendments to its debt agreements for its lines of credit and bank term loan. The amendments allow it to access the existing “surge leverage” provision, which provides for an increase to the maximum thresholds to for its lines of credit. Tanger has repaid $100 million of the outstanding balances. Its cash on hand was approximately $433 million and the firm’s unused lines of credit came to approximately $100 million.