J.C. Penney Lenders Plan Takeover After Sales Talks Stall

J.C. Penney Co.’s lenders are preparing to take ownership of the retailer as talks with potential outside buyers reach an impasse, an attorney for the company said in a bankruptcy court hearing Monday.

“We’ve hit a stalemate,” the attorney, Joshua Sussberg of Kirkland & Ellis LLP, said in the hearing. “Our lenders will no longer be held hostage” by outside bidders, he said.

The company will continue exploring bids, Sussberg said, while it works with lenders to negotiate a debt-for-equity swap in the next 10 days. The lender group originally aimed to take over J.C. Penney’s real estate but sell the retail business.

Mall owners Simon Property Group Inc. and Brookfield Property Partners had been in talks for months with J.C. Penney’s lenders about buying the retail business, but discussions over the weekend couldn’t bridge the gap between the parties, according to people with knowledge of the impasse.

The company still hopes to preserve jobs in the new deal with lenders, Sussberg said. “We are going to do everything humanly possible to ensure that J.C. Penney will be around for the foreseeable future,” he said.

But the latest development could jeopardize that scenario, said Bloomberg Intelligence analyst Poonam Goyal. “If it can’t find a buyer, liquidation may be inevitable,” Goyal said in an email.

Private equity firm Sycamore Partners was another earlier bidder, and either one could return to the table with a fine-tuned offer, said one of the people, who asked not to be named discussing the private negotiations.

J.C. Penney filed for bankruptcy May 15, part of a wave of already-struggling merchants undone as the novel coronavirus shut stores and clipped spending. Advisers to the company boasted throughout the process of robust bidder interest.

The case is J.C. Penney Company Inc., 20-20182, U.S. Bankruptcy Court for the Southern District of Texas (Corpus Christi).

To view the docket on Bloomberg Law, click here.

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