J.C. Penney’s Suitors Circle in Bankruptcy Process
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The future of J.C. Penney Co. Inc. is still up for grabs — but the clock is ticking.
Since the value department store became an early victim of the coronavirus shutdown and filed for bankruptcy on May 15, a series of would-be buyers have come calling.
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But they might have to move quickly.
The retailer is barreling toward a key deadline in the Chapter 11 process and by July 15 will either have to get its lenders to approve a business plan or start to gear up for a sale.
None of the suitors have acknowledged their interest, but sources said web giant Amazon, private equity firm Sycamore Partners and a bloc consisting of Authentic Brands Group and landlords Simon Property Group Inc. and Brookfield Property Partners have all taken a look at the retailer’s business and assets.
Each would have their own take on J.C. Penney’s potential.
Amazon is said to have looked at some of the company’s real estate with land that could be converted to a distribution center and some think the suitor could also be interested in the retailer’s private label business.
Sycamore could slot the chain into its portfolio of retailers, which includes Staples, The Limited, Belk and Talbots, and has some open capacity now that it successfully pulled out of its deal to buy control of Victoria’s Secret.
And ABG, an intellectual property specialist and flexible dealmaker, could help the landlords manage through a difficult bankruptcy given how much space the retailer occupies in malls.
Already, Penney’s is negotiating with its landlords on a different front.
Last week, the retailer formally received the bankruptcy court’s approval for an extension until July 13 to pay some $34 million in rent for the months of June and July. The company is seeking longer-term relief from landlords for both monetary and non-monetary lease modifications, its attorney Aparna Yenamandra of Kirkland & Ellis LLP has told the court.
“As we think about our near-term goals and our long-term goals, our focus right now is to get ourselves in the best position possible, as we head toward July 15,” Yenamandra told the court at a recent hearing.
J.C. Penney has sought to project an image of determined rebirth during the bankruptcy and through the pandemic. The retailer has pushed forward with an aggressive reopening plan, turning the lights back on at some 475 stores as of last week, with plans to reopen more fully by the end of July.
Part of that process has also involved negotiating with vendors, an always delicate process during a bankruptcy where vendors have reasonable concerns about getting paid. Until the retailer received approval for its $900 million DIP facility this month, some vendors were hesitant to ship to it, Yenamandra has told the court. Since then the company and its advisers have been working on negotiating “mutually beneficial post-petition trade terms,” she has said.
One of the vendors that had been holding off was Nike USA Inc., but on Tuesday, the Texas federal judge overseeing the bankruptcy approved a settlement between the parties for Nike to continue shipping.
J.C. Penney has said its merchandising plan envisions receiving another $80 million in goods by the end of the fiscal quarter. “To meet that projection, nearly a third of those goods need to start shipping immediately, and the rest need to be on their way by early July,” the retailer said in a court filing on Monday.
How well Penney’s can stand up through the process could help determine just how the company exits the Chapter 11 process.
ABG has a longstanding partnership with Simon Properties and Brookfield and has helped give a number of other retailers a second life of sorts after bankruptcy.
In February, ABG teamed with the real estate firms to purchase teen retailer Forever 21 out of bankruptcy court for $81.1 million. Under the terms of the deal, ABG and Simon each own 37.5 percent of the intellectual property and operating business and Brookfield owns 25 percent.
ABG also followed the same playbook when it purchased Aéropostale in 2016, teaming on that deal with Simon and General Growth Properties. ABG owns the retailer’s intellectual property and the mall developers operate the stores.
ABG is also seen as the frontrunner to buy Brooks Brothers in partnership with Simon and Brookfield, as reported.
In each of these instances — Brooks Brothers, Forever 21 and Aéropostale — the retailers carry their own private label collections and are viewed by ABG as their own brands that can be expanded and exploited.
In the case of J.C. Penney, which is a multibrand retailer, ABG would most likely employ a different strategy.
Sources said ABG’s chief executive officer, Jamie Salter, is pondering some creative solutions if his consortium is successful in buying J.C. Penney, but for now, he’s keeping his idea under wraps.
An ABG spokesperson said the company had no comment on Penney’s, but when asked about Brooks Brothers earlier this week, Salter acknowledged that he was “very acquisitive” and “looking at a lot of things in the marketplace.”
ABG has also shown a taste for luxury and bought Barneys New York out of bankruptcy last year.
