Bankrupt JCPenney Races Toward a Sale, Will Not Liquidate

Ella Chochrek

Bankrupt J. C. Penney Company Inc. doesn’t plan to close up shop.

The Plano, Texas-based retailer is moving forward with a going-concern asset sale, attorney Joshua Sussberg of Kirkland & Ellis LLP, told a judge on Wednesday. The company has received multiple bids and expects to complete a deal by this fall under an expedited process. It has not seriously entertained the possibility of liquidation, added Sussberg.

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“We have had not one discussion with our lenders or any other stakeholders about a liquidation. That is simply not in the cards,” he said.

The identities of the bidders and the bid amounts have not been disclosed at this time. But Sussberg rebuffed a Monday New York Post story stating that private equity firm Sycamore Partners was the leading bidder — stating the “only thing” the story got right was that multiple bids were submitted.

“There has been no declaration as to what bid is in first, second, third or fourth place, there has been no discussion about any alternatives,” Sussberg said. “And I can tell you that all of the parties-in-interest are working in complete good faith to get to a resolution, and achieve what we have wanted to achieve since Day One, which is a reorganization of this 100-plus-year-[old] company.”

In May, JCPenney outlined plans to separate its operating business from its real estate business in a so-called “prop co/op co” structure. Through this split, the “prop co” would be a public real estate investment trust owned by first-lien lenders, containing the retailer’s owned and ground lease properties along with distribution centers. The inventory and intellectual property, as well as remaining real estate, would make up the “op co” assets.

According to Sussberg, the first-lien lenders previously submitted a bid proposal for a transaction involving both the “prop co” and “op co,” and JCPenney received three additional bids this month for just the “op co.” He explained that the outside bids could possibly be wrapped into the lenders’ bid to make a combined sale bid. An asset purchase agreement outlining the terms of the sales is expected to be put together by early August.

JCPenney filed for bankruptcy in mid-May and has outlined plans to close 242 doors, or about 29% of its fleet, by February 2021. The company closed out the month ended July 4 with just over $1.2 billion in cash and cash equivalents on hand, along with just over $2 billion worth of inventory.

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