The chain, which filed for bankruptcy in May, claims it needs more time to wrap up in-progress mediation talks.
The Texas-based retailer was supposed to have filed by Friday an order approving its asset purchase agreement, along with a Chapter 11 plan and disclosure statement. Instead, the company requested a delay until Monday. That’s because the Penney’s, its two largest landlords Simon Property Group and Brookfield Property Partners and the majority of first-lien lenders are in the midst of mediation discussions hashing out working capital, closing adjustments and specific elements of the master lease agreement. Penney’s said the plan is to have mediation completed before the next status conference date on Oct. 20, before Bankruptcy Judge David Jones.
One key stumbling block is said to be control over who has the final say on the redevelopment of certain properties that house a Penney’s retail store. According to the extension request, court documents said that Bankruptcy Judge Marvin Isgur, who is overseeing the mediation, believes “substantial progress is being made” and that the additional time would help conclude those discussions.
On Wednesday, Penney’s received on competing proposal from the minority group of first-lien lenders, according to court documents. That “proposal is being considered by the debtors and is likewise the subject of mediation discussions with Judge Isgur,” the document read.
The extension request also noted that the bankrupt retailer and its advisors on Oct. 20 will be “prepared to chart a clear path towards the sale hearing that was tentatively scheduled for Nov. 2, 2020. It is absolutely critical to these estates that the OpCo sale move forward and be approved in early November. JCPenney will do whatever it takes to ensure that happens.”
The current plan has the two landlords acquiring the operating component of Penney’s while 161 stores are put into one real estate investment trust and its distribution centers are placed into another, with the first-lien lenders owning what they dub the two REITS PropCo.
Come Monday, if not before, there should be some indication of Penney’s fate. The company and its advisors have stressed their intentions to avoid liquidating and save the more than 60,000 jobs at stake. But it has had too many stumbling blocks along the way, and any more delays would likely add to the already existing jitters among the vendor community, many of which support the retailer but are believed to be holding back shipping much-needed goods for holiday sales until they are certain that Penney’s will remain in business.