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J.C. Penney lenders seek higher bids from potential buyers

Negotiations that have been ongoing for weeks are stuck on a price. Lenders want to fetch the $2.2 billion that they're owed.

A group of lenders steering J.C. Penney’s bankruptcy process is asking potential buyers of the retail chain to increase their bids after a round of offers in July was seen as too low, according to people familiar with the matter.

The lenders are pushing for offers closer to the approximately $2.2 billion of J.C. Penney’s debt they hold, the people said, asking not to be named because the deals are private.

Earlier proposals from mall owners and retail firms added up to payments of about $1.8 billion. If those don’t improve, the lenders could acquire the company through a credit bid, in which they forgive the debt in return for ownership. A bid from mall owners Simon Property Group and Brookfield Property Partners is viewed more favorably in part because it’s likely to preserve the most jobs, the people said.

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The two landlords have an incentive to keep Penney alive because it’s one of their largest tenants.

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Penney employed almost 85,000 people when it went bankrupt in May, but that number is declining by several thousand with 152 stores in the process of closing. It’s also had corporate job cuts at its Plano headquarters.

Private equity firm Sycamore Partners and Saks Fifth Avenue owner Hudson’s Bay Co. were also among the first round of bidders, the people said. Both firms own retail chains they could potentially combine with J.C. Penney or some of its brands. But J.C. Penney attorney Joshua Sussberg, of Kirkland & Ellis LLP, said during a hearing on July 29 that none of the offers propose combining Penney with another brand, and all three bids are for it to emerge as a standalone business.

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Representatives for J.C. Penney, Simon, Brookfield, Sycamore, Hudson’s Bay and lender group leader H/2 Capital Partners all declined to comment or didn’t immediately respond to requests.

Talks have been in the works for several weeks. The Plano-based retailer’s investment banker, Christian Tempke, managing director at Lazard, testified during a hearing on July 1 that three potential buyers for Penney have signed nondisclosure agreements.

The exact value of each offer is hard to quantify because bidders are submitting for different company assets and may include deal sweeteners, said the people. But potential buyers may not need to match the entire dollar amount of the lenders’ offer because there’s value in keeping a retail stalwart open for business.

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Without a satisfactory bid for the retail business, the lenders, who are more interested in the company’s real estate than in running department stores, would seek to liquidate the stores.

The court or creditors could ultimately favor a bid that preserves jobs, even if it isn’t the highest offer, because avoiding mass layoffs and the accompanying bad publicity has become more important to creditors as unemployment has skyrocketed amid the COVID-19 pandemic.


Saving jobs played a role in the 2019 decision to award Sears Holdings Corp. to Eddie Lampert, who promised to keep it running. The treatment of workers in the 2018 liquidation of Toys “R” Us dented the reputations of some lenders and private equity firms involved in the case.

The lender group is in the driver’s seat of the bidding process after supplying a nearly $1 billion bankruptcy loan to J.C. Penney after it filed for Chapter 11.

Bidding procedures will be set Aug. 13, according to a court presentation. Sussberg said in the July 29 hearing that the lender group submitted a formal credit bid last month.

That plan matches an earlier proposal to create a company that owns J.C. Penney’s real estate, according to court records. The lenders are entertaining cash bids from parties who would buy the retail business to be run separately from the real estate. Sussberg said in the hearing that liquidation is “not in the cards.”

Eliza Ronalds-Hannon and Lauren Coleman-Lochner of Bloomberg News. Staff Writer Maria Halkias contributed to this report.

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Twitter: @MariaHalkias

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