JC Penney's lenders are prepared to buy it and allow it to emerge from bankruptcy - The Dallas Morning News

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J.C. Penney doesn’t have a deal with outsiders negotiating to buy the company, but its lender group is preparing a bid that allows the 118-year-old department store to move ahead on its own.

The Plano-based retailer’s lenders are preparing their own initial bid for the company so that a court-supervised auction can move forward. The goal is to have a transaction completed in 30 days, according to an update from lawyers at a bankruptcy court hearing on Monday.

Penney’s lawyer Josh Sussberg told U.S. Bankruptcy Court Judge David Jones on Monday that the parties have been negotiating for weeks, including through last weekend, without a deal.

The judge had called them into a sealed hearing Aug. 19 to tell them to step up the pace after no deal emerged. At an Aug. 12 hearing, Sussberg had said the process was in the “red zone,” using a football term for being close to the goal of having a buyer.

Bidding groups include Simon Property Group and Brookfield Property Partners, who together have 160 Penney stores anchoring their malls. Private equity group Sycamore Partners was also a bidder. A third interested buyer reportedly was Authentic Brands Group, which formed a partnership with Simon called Sparc Group that recently bought Brooks Brothers and others out of bankruptcy.

Penney is a lot bigger fish to swallow than past deals for any of those groups.

During negotiations, as issues were worked out, others would arise “like a Whack-a-mole” game, said Andrew Leblanc, lawyer for Penney’s lenders.

“Certain negotiating egos haven’t been set aside and we’ve hit a stalemate as the business has suffered and vendors are holding inventory making sure J.C. Penney will still be around,” Sussberg said.

While Penney has shored up its cash position, reporting Monday that it has $1.48 billion on hand, its performance in July suffered with coronavirus flare ups. In July, Penney posted a loss of $342 million on sales of $564 million.

“We will confirm a plan in this case,” Sussberg said, noting that 70,000 Penney employees, small towns and vendors depend on the retailer’s business.

The judge ended the hearing by saying, “I hope everyone knows how serious this is. Everyone, focus on the end game.”

Twitter: @MariaHalkias

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