JC Penney | Source: Shutterstock
NEW YORK, United States – A group of lenders involved in the bankruptcy process of JC Penney Co. , asks potential shoppers to increase their bids after a bid was deemed too low in July, according to people familiar with the matter.
The lenders are pushing for offers closer to about $ 2.2 billion of JC Penney’s debt, people said, asking not to be named because the deals are private. Previous proposals from shopping center owners and retailers amounted to payments of about $ 1.8 billion. If that doesn’t improve, the lenders can take over the company through a credit offer, forgiving the debt in exchange for ownership.
An offer from shopping center owners Simon Property Group Inc. and Brookfield Property Partners LP is rated more favorably in part because it is likely to hold most jobs, people said. The two landlords have an incentive to keep JC Penney alive because it is one of their largest tenants. JC Penney employed nearly 85,000 people when it went bankrupt in May.
Private equity firm Sycamore Partners and Saks Fifth Avenue owner Hudson’s Bay Co. were also part of the first bidding round, people said. Both companies own chain stores that they may be able to combine with JC Penney or some of its brands. The New York Post reported on July 27 that Sycamore and Hudson’s Bay had submitted bids for the chain.
Representatives from JC Penney, Simon, Brookfield, Sycamore, Hudson’s Bay and lender H / 2 Capital Partners all declined to comment or did not immediately respond to requests.
The exact value of each bid is difficult to quantify because bidders sign up for different business assets and may contain deal sweeteners, the people said. But potential buyers may not have to match the full dollar amount of the lenders’ offerings, as it is valuable to keep a retailer open for business.
Without a satisfactory retail offer, the lenders, who are more interested in the company’s real estate than running department stores, would try to liquidate the stores.
The court or creditors could ultimately favor a job-preserving bid, even if it isn’t the highest bid, as avoiding massive layoffs and the associated bad publicity has become more important to creditors as unemployment has risen during the Covid-19 pandemic.
Saving jobs played a part in the 2019 decision to award Sears Holdings Corp to Eddie Lampert, who promised to keep it going. The treatment of employees in the liquidation of Toys “R” Us in 2018 detracted from the reputation of some affiliated lenders and private equity firms.
JC Penney announced in mid-July that it would permanently close over 150 stores and cut 1,000 jobs.
The lender group is at the helm of the bidding process after it granted a bankruptcy loan of nearly $ 1 billion to JC Penney after it filed for Chapter 11. Bidding procedures will be set for August 13, according to a court presentation.
JC Penney attorney Joshua Sussberg of Kirkland & Ellis LLP told the court on July 29 that the lender group submitted a formal credit offer last month. That plan is consistent with a previous proposal to create a company that owns JC Penney’s property, according to court records.
The lenders receive nice bids from parties that would buy retail to be managed separately from the property. Sussberg said at the hearing that liquidation was “not on the cards.”
By Lauren Coleman-Lochner and Eliza Ronalds-Hannon