The agreement, while it seems complex on the surface, is meant solely to supply the hedge fund manager an exit:
On August 13, 2013, J. C. Penney Company, Inc. (the “Company”) entered into a Registration Rights Agreement with Pershing Square Capital Management, L.P., PS Management GP, LLC, Pershing Square GP, LLC, William A. Ackman and certain affiliated Pershing Square funds (collectively, the “Holders”). Pursuant to the Registration Rights Agreement, the Holders may make up to four requests to the Company to register the sale of the Company’s common stock beneficially owned by the Holders, subject to the limitations and conditions provided in the Registration Rights Agreement. The Registration Rights Agreement also provides certain piggyback registration rights to the Holders. The registration rights provided in the Registration Rights Agreement terminate when the Holders collectively beneficially own less than 5% of the Company’s common stock. The Registration Rights Agreement contains customary indemnification provisions.The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Registration Rights Agreement which is filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated by reference herein.Item 9.01 Financial Statements and Exhibits.
(d) Exhibit 10.1 Registration Rights Agreement dated August 13, 2013 with J. C.Penney Company, Inc., Pershing Square Capital Management, L.P., PS Management GP, LLC, Pershing Square GP, LLC, William A. Ackman and certain affiliated Pershing Square funds
Ackman may be best done with J.C. Penney. Although his loss on the stock will be into the hundreds of millions of dollars, in a Chapter 11 the value of the shares could drop to zero. As J.C. Penney’s sales drop by roughly 20% quarter over previous year’s quarter, the firm could run out of money, despite a $1.75 billion financial facility raised by Goldman Sachs Group Inc. (NYSE: GS).
Penney shares currently trade at at just over $13, down from a 52-week high of $32.55.