Non-public fairness agency Sycamore Companions is in preliminary talks to amass JCPenney out of chapter ought to the US division retailer chain’s negotiations with its collectors fail, three individuals acquainted with the matter mentioned on Friday.
Shares of JCPenney jumped nearly 55 % on the information.
JCPenney, which employs roughly 85,000 individuals, filed for bankruptcy protection in Could after the coronavirus pandemic pressured it to briefly shut its greater than 800 shops throughout the US, compounding monetary woes that stemmed from years of dwindling gross sales.
Sycamore is weighing buying JCPenney outright or investing within the troubled retailer, the sources mentioned.
There isn’t any certainty that the talks between Sycamore and JCPenney will lead to a deal, which might require a chapter decide’s approval, the sources mentioned.
JCPenney can also be in contact with a few of its landlords, together with Brookfield Asset Administration and Simon Property Group, about potential transactions, the sources mentioned. Below one situation being explored, Sycamore, Brookfield and Simon would be part of forces on a bid for JCPenney, two of the sources mentioned.
The sources requested anonymity as a result of the discussions are confidential. Sycamore and JCPenney declined to remark. Brookfield had no quick remark whereas Simon didn’t instantly reply to a request for remark.
JCPenney is in discussions about handing over management to its lenders in alternate for lowering its practically $5 billion of debt. This hinges on a slew of funding companies that maintain the corporate’s senior debt and have supplied the corporate’s chapter financing agreeing to JCPenney’s marketing strategy by July 14.
If the Plano, Texas-based firm doesn’t persuade sufficient lenders to approve its plan by the next day, July 15, the phrases of its chapter mortgage require JCPenney to desert its reorganization efforts and pursue a sale.
It’s unclear how a lot Sycamore is prepared to pay for JCPenney, which is within the means of permanently closing stores and slicing jobs.
Sycamore, a New York non-public fairness agency that focuses on retail and shopper investments, has previously taken management of high-profile companies reminiscent of workplace provides chain Staples, ladies’s clothes retailer Talbots and department-store operator Belk.
Final month, Sycamore walked away from a $525 million deal to purchase a majority stake in L Manufacturers’s Victoria’s Secret, because the pandemic hammered gross sales on the lingerie chain.
Brookfield and Simon function malls throughout the US. Brookfield in Could mentioned it will dedicate $5 billion to non-controlling investments designed to revitalize retailers struggling within the wake of the coronavirus outbreak.
Throughout a courtroom listening to on Thursday, US Chapter Decide David Jones authorized contemporary financing from senior lenders to assist JCPenney’s operations whereas it navigates Chapter 11 safety, and expressed concern the 118-year-old chain wanted to restructure shortly to outlive.
In July, the lenders will “determine whether or not the dream lives or the dream dies,” mentioned Cathy Hershcopf, a collectors’ lawyer, in the course of the listening to.
Below a plan being mentioned with its collectors, JCPenney can be cut up into two firms. One can be an actual property funding belief that might maintain a number of the firm’s property and lease it again to JCPenney. The opposite would function JCPenney’s retail enterprise.
Joshua Sussberg, a Kirkland & Ellis LLP lawyer representing JCPenney, mentioned throughout Thursday’s courtroom listening to that the corporate wanted to steer lenders negotiating to take management of the restructured enterprise to maintain it alive and that he deliberate to carry them accountable for a way the case ended.
Even in less-fraught occasions, many retailers, together with Barneys New York Inc and Toys ‘R’ Us, have didn’t reorganize below chapter safety and gone out of enterprise for good.
JCPenney on Thursday mentioned it plans to completely shut 154 shops, and will shut extra. It has to date reopened practically 500 shops that have been closed as a result of pandemic, and plans to carry further places on-line in coming weeks. Nonetheless, issues stay that clients could be sluggish to return amid well being issues and job losses not seen because the Nice Melancholy.
JCPenney can also be searching for permission from landlords to skip hire funds for June, July and August, Sussberg mentioned final week.