Bankrupt JC Penney May Be Bought By Its Lenders

JC Penney, which filed for bankruptcy in mid-May, could fall into the hands of its lenders after talks with potential buyers have come to a “stalemate,” CNBC reported.

The retailer, which has been courted by Sycamore Partners and Hudson Bay Co., may now have its lenders take over the company as part of an effort to keep stores open and save jobs.

As discussions stalled with the potential buyers, Joshua Sussberg, an attorney at Kirkland & Ellis, said in the bankruptcy hearing that time was running out for JC Penney by its lenders, which include H/2 Capital Partners, as a standalone company.

During the hearing, Sussberg said the transaction to purchase JC Penney by its lenders should be completed within 30 days.

"Our lenders are no longer going to be held hostage in negotiations with third parties. While it is possible that one of the bidders comes back into the transaction, we can no longer stand idly by and allow for negotiating postures to stand in the way of 70,000 jobs and our vendor base," Sussberg said.

The purchase agreement will help to salvage several of JC Penney’s stores, many of which were on the chopping block as discussions with potential bidders fell through.

At the time it filed for bankruptcy, JC Penney announced it would be closing 242 stores. That number was later reduced, but layoffs plagued the retailer as about 1,000 employees were cut as it shut down about 150 stores. JC Penney had about 860 stores at the time it filed for bankruptcy.

“Several locations that were on our original closing list but were removed ... because of negotiations ... will be closed promptly,” Sussberg said at the hearing.

JC Penney was struggling with dropping sales and low foot traffic before the coronavirus pandemic, which was only compounded by temporary store closures in March due to the virus.