Bankrupt J.C. Penney Co. Inc. was in court on Tuesday for a confirmation hearing hoping to get the nod to exit bankruptcy proceedings.
The retailer’s attorney Joshua Sussberg from Kirkland and Ellis said at the start of the hearing that the sale of the company is expected to close on Wednesday, allowing the new owners—its majority group of first-lien lenders for its real estate assets and Simon Property Group and Brookfield Capital Partners for the operating component of the business—to take control before the start of Black Friday sales.
It was learned at a prior court hearing that Simon and Brookfield had wanted to close on the transaction before the retailer’s critical holiday selling period.
Sussberg also disclosed that all the professionals in the case were adamant about not letting the 118-year-old company fall into liquidation mode. “All the data suggest that when a retailer enters [Chapter 11], most often than not [the company] ends in liquidation. This is not something that we are prepared to live [with],” the attorney told U.S. Bankruptcy Judge David Jones, sitting in Corpus Christi, Tex.
He also said the last six months have been about everyone working on “executing on a vision and frankly, pure will.” And contrary to objections by constituency groups who are not pleased with either limited recovery or no recovery, Sussberg said that there was “no grand master plan to steal value from shareholders.”
Some creditor groups are expected to receive limited recovery, while equity shareholders will see their shares get extinguished.
Sussberg said his law firm and Lazard, the investment banker for JCP, were hired in July 2019 to help with a restructuring because of the retailer’s overleveraged balance sheet. Brand new management was brought in just before the bankruptcy filing in May. “To say the company was thriving pre-Covid [is] untrue,” he said, noting that store locations were temporary closed in March due to the pandemic and employees were furloughed.
Chapter 11 was “the only option for the company to survive,” the lawyer told Judge Jones.