Bankrupt J. C. Penney & Co. Inc. is still hoping to get a deal done to sell the company and keep the retailer alive, but the latest snag is about a push for more money from potential bidders.
Lenders in the case are asking three potential bidders to raise their offers as they hope to get closer to the $2.2 billion they’re owed. Existing offers are closer to the $1.8 billion range.
Private equity firm Sycamore Partners is said to be one of the bidders. Another offer comes from two mall landlords, Simon Property Group and Brookfield Property Partners, both joining forces in a joint bid viewed as a way to stabilize their roster of mall tenants. Canadian retail firm Hudson’s Bay Co., which operates Hudson’s Bay stores as Saks Fifth Avenue and whose chairman Richard Baker has been on the hunt for an acquisition, is said to be interested in JCP as well. Three years ago, Macy’s spurned his acquisition attempt, Baker turned his attention to Neiman Marcus, also currently operating under bankruptcy protection, but couldn’t secure financing. Fast forward to April, and Baker was said to be taking a second look at Neiman just before it filed its Chapter 11 petition. With Neiman focused on an exit as a standalone company, he then turned his attention to Penney’s.
Whether the lenders will get what they ask for remains to be seen. They can still acquire Penney’s and use their credit bid to offset the purchase price. In the process, they would get to own Penney’s and exchange debt for equity in the reorganized Penney’s. But since they’re not retail operators, they’d probably prefer to have someone else buy the operation. That would leave them focused on the ownership of certain of Penney’s real estate, whether those that house some of Penney’s stores or the ones where distribution centers are located.
Of course, the bankruptcy court has final say on any sale agreement. And it might prefer a sale to a bidder with a lower offer if it has the potential to keep Penney’s associates employed. There’s already precedent for that from the Sears Holdings Corp. bankruptcy in 2019. Creditors were pushing for a liquidation because they felt Sears’ assets were worth more dead than alive. And they didn’t see the point of keeping the business going if there was a strong likelihood that the operation would end up dying a slow death as many store shut down. The bankruptcy judge eventually agreed that a Sears sale was the only option that would preserve employee jobs.
Bloomberg was first to report on Wednesday that the lender group was pushing for higher offers.