J.C. Penney’s discussions with potential acquirers of the company have hit a “stalemate” and the bankrupt retailer’s top lenders are considering making a “credit bid” to own the retailer as a stand-alone company.
If the deal goes through, the lenders would own J.C. Penney, likely as a much smaller company than currently. Top lenders include H/2 Capital Partners
Joshua Sussberg of Kirkland & Ellis said Monday at a bankruptcy court hearing in U.S. Bankruptcy Court in Corpus Christi, TX, “We are going to do everything humanly possible to ensure that J.C. Penney will be around for the foreseeable future.”
Penney filed for Chapter 11 bankruptcy protection on May 15. When it filed for bankruptcy, it was still operating about 860 stores.
Talks with three potential bidders, including Simon, the biggest mall owner in the U.S. by number of locations, and Brookfield, another big shopping-center owner, had been underway and could possibly keep hundreds of stores open for business. Private-equity firm Sycamore Partners also submitted a bid. Lenders were open to separate deals for the retail business, including intellectual property and hundreds of stores, as well as one for the real estate.
The negotiations have dragged on in part over lease terms, people familiar with the matter told Reuters.
“Our lenders are no longer going to be held hostage in negotiations with third parties,” Sussberg said, according to CNBC. “While it is possible that one of the bidders comes back into the transaction, we can no longer stand idly by and allow for negotiating postures to stand in the way of 70,000 jobs and our vendor base.”
A lawyer for the lenders, Andrew Leblanc of Milbank LLP, said there were “lots of hurdles” to reaching such a deal, describing negotiating an agreement on a short timeframe as a “heavy lift.” The two sides set a September 10 deadline.
Sussberg added that Penney is set to close a number of additional stores as acquisitions discussions have stalled. The department store chain last month announced it would be laying off roughly 1,000 employees as it moved forward to close about 150 locations across the U.S.
“Several locations that were on our original closing list but were removed … because of negotiations … will be closed promptly,” Sussberg said.
Photo courtesy J.C. Penney
