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Is the J. C. Penney Deal in Trouble?

On Tuesday, bankrupt J. C. Penney will finally file court documentation for the proposed sale of its operations to Simon Property Group and Brookfield Property Group.

The documentation will be available through claims agent Prime Clerk, which handles the docket sheet for all filings in the JCP bankruptcy case, the retailer stated in a regulatory filing.

What’s troubling, however, is that it’s still just a draft, and not a final binding asset purchase agreement, though it could be described as a step up from its Sept. 10 non-binding letter of intent. And JCP admitted as such in its Securities and Exchange Commission filing: “The company and the other parties to the [letter of intent] are working to conclude negotiations and enter into a final asset purchase agreement.”

A final agreement was supposed to have been filed on Friday, along with a Chapter 11 plan and disclosure statement. The parties have been in mediation to hash out certain issues that have resulted in stumbling blocks to getting a finalized agreement completed. Last week, JCP filed for an extension of Friday’s filing deadline to Monday to wrap up mediation talks and give it time to get a plan filed before Tuesday’s status conference date before Bankruptcy Judge David Jones.

Time is now JCP’s enemy.

The plan was to have a sale hearing on Nov. 2, with an eye toward confirming a reorganization plan later in the month and exiting Chapter 11 sometime in December. JCP noted in its extension request that it received a competing proposal from the minority group of first-lien lenders. Perhaps the plan is to have a draft agreement in place for the minority group to review as JCP works with both offers to determine which is best for the company before it can submit a final binding asset purchase agreement as it prepares for a going-concern exit from Chapter 11 proceedings. Or the delay might have been due to talks with both sides over the weekend, and the mass merchant has decided to stick with the original proposed plan after all.

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Regardless of how talks are proceeding behind the scenes, any other delay that might come up could present a problem for JCP as members of a jittery vendor community debate the merits of shipping much-needed goods to a retailer whose future remains shrouded in uncertainty.

In fairness to JCP, the retailer might not have a choice as it tries to excavate itself from the black hole of bankruptcy. With more than 60,000 jobs at stake and a commitment to exiting Chapter 11, the hope is that JCP can seal a deal in short order so vendors too can craft their own company business plans as they work on projections for 2021.

“This is another important milestone in our restructuring plan, bringing us one step closer to finalizing the [asset purchase agreement], closing the sale process and exiting Chapter 11 ahead of the December 2020 holiday season,” Jill Soltau, JCP’s CEO, said Tuesday.

The problem for JCP is that Holiday 2020 in the era of social distancing and against a Covid-19 backdrop began earlier this month for most of its competitors.