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J.C. Penney shareholders want a voice in bankruptcy

The owners of common shares are generally the last in line for any payouts from assets in a bankruptcy.

J.C. Penney’s shareholders are trying to become a collective voice in the Plano-based retailer’s bankruptcy.

A group of shareholders have set up a petition on Change.org, and are asking for their peers to sign it and join in on a statement that organizers said will be added to the record of Penney’s bankruptcy.

The “J.C. Penney Bankruptcy Shareholder’s Rights Petition” went up Wednesday morning and has more than 100 signers.

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Longtime Penney shareholder Nick Celentano, a petition organizer, said that bankruptcy is “a terrible outcome for J.C. Penney that we believe could have been avoided.”

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J.C. Penney filed for bankruptcy Friday and said that having all its stores closed since mid-March was too much to overcome without shedding its debt, selling assets and reorganizing.

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The shareholder petition asks that Penney’s common stock, which last traded on the New York Stock Exchange at 18 cents a share, not be canceled and that CEO Jill Soltau return the compensation she was granted the week before the bankruptcy filing. Shares now trade on the over-the-counter market, sometimes called the pink sheets or where penny stocks trade.

“At this point those shares are like lottery tickets,” said Georgetown University finance professor James Angel. "People still trading the stock are saying, ‘you maybe, maybe, maybe get something at the end, and you haven’t given up hope.'”

Shareholders also want to benefit from $2.2 billion in net operating losses that Penney has banked and valued at about $735 million. In addition, they want to recover $1.68 a share, the price of Penney’s stock at the time Soltau was hired in October 2018.

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A few shareholders spoke at a hearing on Saturday before U.S. Bankruptcy Court Judge David Jones. He told shareholders during Penney’s first-day hearing that they should find each other on chat boards and get their group organized.

“I lost everything," said one shareholder who said he is also a former employee, adding that the judge was “the last hope that shareholders have.

"There are thousands of us.”

While the judge didn’t promise anything, he said that navigating a case like Penney’s is hard for an individual to do. He suggested that they “muster their resources.”

“Put it in writing,” Jones said, adding that he “cannot be predisposed in any direction.”

While Penney’s shareholders are making a stand, there’s little precedent for shareholders of public companies to come out with anything from a court-led reorganization.

There’s a strict pecking order, with government taxes, lenders, other creditors including utilities and merchandise suppliers, bondholders and preferred shareholders all paid ahead of common shareholders.

Celentano said he sent a letter to the judge on behalf of himself and 18 other shareholders who together own more than 2 million shares of Penney stock. He believes that many of the plans the company is presenting now in court could have been done to raise cash without a bankruptcy filing.

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“I’m also questioning the company’s reckless decisions to pay April rents, give themselves retention bonuses, and make that $17 million interest payment on the morning of the filing."

Penney made one of the two interest payments it had skipped on Friday as it was negotiating lenders to extend financing for the company to use during the bankruptcy.

Twitter: @MariaHalkias

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