JCPenney: Chapter 11 Sale to Simon and Brookfield, PropCo Wind-Down

J. C. Penney Company, Inc. and its affiliated debtors filed chapter 11 petitions on May 15, 2020 in the U.S. Bankruptcy Court for the Southern District of Texas (Corpus Christi Division), case number 20-20182, before Hon. David R. Jones. The filing arrived after the company closed all 846 of its stores under COVID-19 lockdowns and lost the operating cash flow needed to service roughly $5 billion in funded debt. JCPenney entered the case with a Restructuring Support Agreement already in hand from its first lien ad hoc group, contemplating a sale to lenders rather than a stand-alone reorganization.

The case ultimately produced a dual-entity OpCo/PropCo structure: Simon Property Group and Brookfield Asset Management acquired the operating retail business through a $1 billion credit bid, and roughly 120 store-level real properties were dropped into the Copper Property CTL Pass Through Trust to be liquidated for first lien creditors. The plan was confirmed on December 16, 2020 and went effective on January 30, 2021. Five years later the case remains active: the PropCo trust is still working through a portfolio liquidation that recently lost its largest buyer, and the JCPenney plan administrator is litigating multimillion-dollar fee disgorgement claims against co-counsel Jackson Walker tied to an undisclosed romantic relationship between one of the firm's partners and Judge Jones.

Debtor(s)	J. C. Penney Company, Inc. (jointly administered affiliates; now Old Copper Company, Inc. as Wind-Down Debtor)
Court	U.S. Bankruptcy Court, Southern District of Texas (Corpus Christi Division)
Case Number	20-20182
Petition Date	May 15, 2020
Confirmation Date	December 16, 2020
Effective Date	January 30, 2021
Judge	Hon. David R. Jones (resigned; cases reassigned post-confirmation)
Plan Type	Asset sale plus wind-down; OpCo/PropCo structure
DIP Facility	$900 million senior secured superpriority priming DIP
Claims Agent	Prime Clerk LLC

Pandemic Closures and Pre-Existing Retail Distress

Court testimony and pleadings describe a debtor that was already in distress before COVID-19 forced the filing. Management acknowledged that the company was in distress in 2019, before the pandemic, after years of declining comparable sales and sustained competition from e-commerce, fast-fashion, and off-price brick-and-mortar formats. Reuters described the case as the largest U.S. retail bankruptcy of 2020, driven in part by a century-old format that had not kept pace with the shift to online and discount channels.

The acute trigger was the pandemic shutdown. In March 2020, JCPenney closed all 846 of its stores, furloughed the majority of its associates, and extended payment terms to suppliers. The company entered May 2020 unable to maintain operations as a going concern and elected a court-supervised process. Court filings describe the company at that time as carrying approximately 60,000 associates and roughly $5 billion in funded debt against a retail footprint that had effectively been forced offline. JCPenney was one of several legacy retailers that filed during the same window, alongside other COVID-era anchors that pushed mall landlords into their own restructurings later that year.

The retailer also entered the case with significant retiree exposure. The Pension Benefit Guaranty Corporation took over JCPenney's underfunded defined benefit pension plan during the bankruptcy, terminating the plan and assuming responsibility for benefit payments while the company remained in chapter 11.

Five-Tranche Capital Structure and the First Lien Lender Group

JCPenney's prepetition capital structure carried roughly $5 billion in funded debt across five buckets, ranked from senior secured to unsecured. The structure dictated who controlled the case from day one.

The first lien ad hoc group held the leverage to dictate the case architecture: those lenders agreed to a prepetition Restructuring Support Agreement that contemplated a credit bid for the operating business, a real estate trust for store-level properties, and a "Market Test" marketing process designed to flush out any third-party offers before the credit bid closed. No third-party going-concern bidder ultimately emerged, which left the first lien group with the company.

$900 million priming DIP. On petition, the debtors secured a senior secured superpriority priming debtor-in-possession credit facility with an aggregate principal amount of $900 million, provided by the DIP Lenders under a DIP Credit Agreement. Because the facility primed the prepetition first lien debt, it gave the DIP/first lien group structural control over the sale timeline; once the company depleted the facility, the DIP claims either had to be paid in cash or rolled into a credit bid. The DIP Claims were ultimately allowed in the aggregate principal amount under the DIP Credit Agreement and were satisfied at sale closing primarily through the credit bid mechanism.

RSA milestones. The DIP financing sat alongside the RSA executed prepetition with the ad hoc first lien lender group. The RSA mandated the OpCo/PropCo construct, the Market Test marketing process, and a credit bid construct as the fallback exit. By tying DIP availability to RSA-driven milestones, the structure narrowed the universe of credible alternatives to either a stalking-horse-quality third-party bid or a credit bid by the lenders themselves.

JCPenney burned through the early summer of 2020 trying to attract a third-party operator. By September 9, 2020 the company announced an agreement in principle with Simon Property Group and Brookfield Property Partners — its two largest mall landlords — for what was then valued at roughly $1.75 billion in cash and assumed debt. The deal averted what the New York Times described as a near-term liquidation scenario for one of the country's last surviving mid-priced department chains.

OpCo/PropCo Structure and the $1 Billion Credit Bid

The asset purchase agreement executed on October 28, 2020 split the company into two parallel vehicles:

OpCo (operating company). The retail business — inventory, intellectual property, supply contracts, and the JCPenney brand — was acquired by Copper Retail JV LLC, a joint venture initially formed on a 50/50 basis between Simon Property Group, L.P. and Brookfield Asset Management Inc. Each sponsor contributed $150 million in member capital at closing. After closing, Simon and Brookfield sold a 16.67% membership interest to Authentic Brands Group, LLC. JCPenney subsequently combined with SPARC Group — the operator of Aéropostale and Brooks Brothers — to form Catalyst Brands, with Shein as an additional stakeholder in the expanded consortium.

PropCo (real property). Approximately 120 store-level real properties were transferred to the Copper Property CTL Pass Through Trust, a liquidating vehicle established to sell those assets and distribute proceeds to secured creditors. The trust is a finite-life vehicle whose formation documents required liquidation of the portfolio and termination no later than January 30, 2026.

Credit bid mechanics. The $1 billion aggregate credit bid that closed the OpCo sale comprised $900 million in DIP facility claims plus $100 million in first lien debt claims, credit-bid by the DIP lenders into Copper Retail JV. Combined with Simon and Brookfield's $300 million of member capital contributions and the assumption of certain liabilities, the deal was structured at roughly $1.75 billion, the figure publicly attributed to the transaction at signing.

The court conducted a sale hearing on November 9, 2020 and entered the Sale Order at Docket 1814. By then, JCPenney had also resolved the most contentious lender objections; the holdout first lien group reached a settlement clearing the path to confirmation. Around the same period, JCPenney moved forward with closures of more than 140 stores as part of the buyer-driven footprint reduction, leaving the surviving operating chain at roughly 600 locations.

Confirmation, Class Treatment, and the Wind-Down Reserve

The Joint Chapter 11 Plan of Reorganization was confirmed on December 16, 2020 and went effective on January 30, 2021. The class structure and treatment provisions made the recovery picture sharply binary: senior secured claims got cash or a credit-bid stake, while every junior class depended on the residual value of a Wind-Down Reserve and a contingent earnout pool.

By the time the trustees of the unsecured note trusts circulated noteholder updates in early 2024, the operative answer for general unsecured creditors had crystallized: U.S. Bank and BOKF, NA (as indenture trustees) confirmed that the Unsecured Claims Earnout Pool had been determined to have a value of zero, and that there would be no further distributions on JCPenney debentures or unsecured notes. With Class 4 First Lien Claims still unsatisfied from the Wind-Down Reserve and PropCo trust distributions, no recovery on Class 8 General Unsecured Claims is currently anticipated.

Onyx Partners and the Terminated PropCo Sale

The PropCo trust spent more than four years selling assets one or two at a time. On July 23, 2025, the trust announced an agreement with Onyx Partners, LLC to sell its remaining portfolio in bulk for approximately $947 million in a single transaction, with closing required on or before September 8, 2025.

Onyx did not close on the agreed timeline. By December 2025, the $947 million deal had terminated after Onyx failed to close by the contractual deadline. Coverage of the collapse noted that Onyx had agreed to take more than 110 store sites covering 35 states and Puerto Rico, and that the trust had been counting on the bulk sale to fund a final round of distributions and meet its January 30, 2026 wind-up deadline. After the failed close, the trust returned to a property-by-property liquidation posture. Its February 2026 reporting package disclosed a $6.2 million monthly distribution to certificateholders, indicating that some asset sales are still moving despite the bulk-deal failure.

Jackson Walker, Elizabeth Freeman, and the Judge Jones Disclosure

The most consequential post-confirmation contested matter has nothing to do with the plan terms. It concerns the disclosure record of co-bankruptcy counsel Jackson Walker L.L.P., which served alongside lead counsel Kirkland & Ellis throughout the JCPenney case.

Court filings describe a long-term romantic relationship between Elizabeth Freeman, then a Jackson Walker partner, and Hon. David R. Jones, the bankruptcy judge presiding over JCPenney and many of the largest restructuring cases in the Southern District of Texas. According to the U.S. Trustee's response, Freeman and Judge Jones cohabited in a jointly owned home, and Freeman was both the executor of and a beneficiary under Judge Jones's will. The U.S. Trustee contends that Jackson Walker became aware of the relationship by no later than March 2021 and had full knowledge by February 2022, but did not disclose it to courts where Jones was presiding. The bankruptcy court's memorandum opinion on the Jackson Walker fee matters lays out the disclosure framework the firm is alleged to have breached.

In the JCPenney case specifically, Jackson Walker's total approved fees are approximately $1,101,482.21 — the figure the U.S. Trustee initially placed in dispute under Rule 60(b)(6) motions. The Wind-Down Debtors (Old Copper Company Inc.) filed an adversary proceeding against Jackson Walker on January 28, 2025 seeking disgorgement and related relief; Jackson Walker has asserted that plan releases and exculpations bar the claims, a position the Wind-Down Debtors and the U.S. Trustee dispute. The plan administrator's amended complaint seeks to claw back at least $2.6 million in fees from Jackson Walker across all of its representations connected to the relationship period, with allegations of an internal cover-up.

The Wall Street Journal reported in September 2025 that JCPenney is set to recoup roughly $1.4 million from Jackson Walker under a tentative resolution. By March 2026, Jackson Walker and the U.S. Trustee reached a broader settlement framework covering disputed fees in cases presided over by Judge Jones, and a separate court described the cross-case settlements as a "dilemma" for the trial-level judges tasked with approving them. Judge Jones resigned from the bench in connection with the disclosure of the relationship, and the JCPenney bankruptcy cases were reassigned.

Eric Moore and Barnett Capital Plan-Injunction Contempt

A second post-confirmation litigation strand has played out around the plan's permanent injunction. Eric Moore, a creditor who purchased discounted first lien debt in October 2023 — years after plan confirmation — pursued a sustained campaign challenging the confirmed plan and PropCo asset valuations. The Wind-Down Debtors and PropCo characterized those efforts as collateral attacks on the Sale Order and Confirmation Order.

The court denied Moore's enforcement motion on September 9, 2024, dismissed an adversary proceeding brought by Moore against PropCo on September 24, 2025, and on August 19, 2025 found Moore in civil contempt for violating the plan's permanent injunction. Moore's appeal of the contempt order was dismissed by the District Court on February 2, 2026 as untimely.

PropCo and the JCP Investors then filed an emergency contempt motion against Barnett Capital on November 12, 2025, alleging that Barnett's conduct also violated the plan injunction. PropCo framed the Barnett motion as part of a broader pattern of parties attempting to revisit confirmed plan economics. A sanctions hearing was anticipated as the case approached its final-decree window.

Professionals, Claims Agent, and Trust Wind-Down

The confirmation record identifies the case's principal professionals: Kirkland & Ellis LLP and Kirkland & Ellis International LLP as lead bankruptcy counsel, Jackson Walker L.L.P. as co-bankruptcy and conflicts counsel, Lazard Frères & Co. LLC as investment banker and financial advisor, AlixPartners, LLP as restructuring advisor, Prime Clerk LLC as claims, noticing, and solicitation agent, KPMG LLP as tax restructuring advisor, Gordon Brothers Retail Partners, LLC as store closing consultant, and B. Riley Real Estate, LLC together with Cushman & Wakefield U.S., Inc. as co-real estate consultants. Kirkland & Ellis's own 2020 restructuring retrospective identifies JCPenney among its completed 2020 mandates.

Jackson Walker's first interim fee application was filed February 5, 2021 and approved March 8, 2021; its second interim and final fee application was filed March 10, 2021 and approved April 8, 2021. Those orders are now the focus of the disgorgement litigation described above. The general bar date for filing proofs of claim was July 10, 2020, and Prime Clerk LLC continues to serve as the case's claims and noticing agent. The Wind-Down Debtors anticipate filing a final decree application by June 30, 2026, contingent on resolution of the remaining plan-injunction litigation and completion of the Copper Property CTL Pass Through Trust's residual liquidation.

Key Timeline

Frequently Asked Questions

Who acquired J. C. Penney out of chapter 11?

Simon Property Group, L.P. and Brookfield Asset Management Inc. acquired the operating retail business through Copper Retail JV LLC at closing on January 30, 2021. The acquisition combined a $1 billion credit bid by the DIP and first lien lenders with $300 million in cash equity from Simon and Brookfield. Authentic Brands Group, LLC subsequently bought a 16.67% membership interest from the two sponsors. JCPenney later combined with SPARC Group to form Catalyst Brands, with Shein as an additional stakeholder.

What happened to JCPenney's real estate?

Approximately 120 store-level real properties were transferred to the Copper Property CTL Pass Through Trust, a finite-life liquidating trust formed at plan effectiveness. The trust's bulk sale of the remaining portfolio to Onyx Partners for roughly $947 million terminated in December 2025 after Onyx failed to close by the September 2025 deadline.

Did general unsecured creditors recover anything?

No further distributions are anticipated for Class 8 General Unsecured Creditors. The Unsecured Claims Earnout Pool was determined to have a value of zero, and Class 4 First Lien Claims remain unsatisfied from the Wind-Down Reserve and PropCo trust distributions. U.S. Bank and BOKF, NA, as indenture trustees, confirmed in early 2024 that there would be no further distributions on JCPenney debentures or unsecured notes.

Who is the claims agent for JCPenney?

Prime Clerk LLC serves as the claims and noticing agent. The general bar date for filing proofs of claim was July 10, 2020.

What is the Jackson Walker fee dispute about?

The U.S. Trustee and the Wind-Down Debtors have alleged that Jackson Walker L.L.P. failed to disclose a long-term romantic relationship between partner Elizabeth Freeman and presiding Judge David R. Jones. JCPenney's plan administrator filed an adversary proceeding seeking disgorgement of fees, with the amended complaint targeting at least $2.6 million in fees across the firm's relevant representations. A March 2026 settlement framework between Jackson Walker and the U.S. Trustee covers cross-case disputed fees, and the Wall Street Journal reported a tentative resolution under which JCPenney would recoup roughly $1.4 million.

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