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liquidation Penney

J.C. Penney liquidation ‘not in the cards,’ as retailer moves toward a sale this fall – CNBC

A J.C. Penney store in Laguna Hills, California

Scott Mlyn | CNBC

For bankrupted J.C. Penney, a liquidation is “not in the cards,” according to the department store chain’s attorney. 

Penney is moving forward with a sale that should be completed by this fall, attorney Joshua Sussberg of Kirkland & Ellis said during a court hearing Wednesday afternoon. 

“I want to say, unequivocally, we have had not one discussion about a liquidation,” Sussberg said about Penney’s restructuring process. “It’s simply not in the cards.” 

Sussberg called attention to a report earlier in the week from the New York Post that said the private-equity firm Sycamore was planning to make a $1.75 billion bid to buy the 118-year-old department store chain and merge it with rival Belk. 

He called the story “ill-informed” and said, regarding Sycamore’s plans to merge Penney with Belk, “that is completely untrue.” 

There are three separate bids being considered for Penney’s real estate and other assets, which would keep the retailer operating its own stores, Sussberg said. 

The bidders include Sycamore, a duo of U.S. mall owners Simon Property Group and Brookfield Property Partners, and Saks Fifth Avenue owner Hudson’s Bay Co., according to a person familiar with these discussions. The person requested anonymity because the proposals remain confidential. 

Sycamore declined to comment. Representatives from Simon, Brookfield and Hudson’s Bay did not immediately respond to CNBC’s requests for comment. 

Kirkland’s Sussberg said during Wednesday’s hearing that a top bidder had yet to be chosen. 

Penney filed for Chapter 11 bankruptcy protection on May 15, weighed down by debt and battered by the coronavirus pandemic. 

Earlier this month, the company announced it would be laying off roughly 1,000 employees, as it moved forward with shutting about 150 locations across the U.S. When the retailer filed, it was still operating about 860 stores. 

Penney said Wednesday that all stores have since reopened, after being temporarily shut due to the Covid-19 crisis. 

It said its off-mall locations, of which it has 173, continue to perform better than its stores in enclosed shopping malls, of which it has 520. Sales at off-mall stores are down about 26%, while sales at Penney stores in malls are down about 33% since they have opened, it said. 

The department store chain continues to talk to its landlords to negotiate better rents, according to Sussberg, which is allowing the company to cut costs. 

Forty retailers including Penney have filed for bankruptcy in 2020, according to a tracking by S&P Global Market Intelligence. The list is still expected to grow. 

A number were already struggling prior to the Covid-19 crisis slamming the U.S. economy, forcing shops deemed nonessential and malls to be boarded up. The pressures have only intensified since for an industry already undergoing seismic shifts in consumer behavior and preferred shopping destinations. Department stores’ dominance in retail has been waning. 

According to Sussberg, Penney aims to have “mass consensus” regarding its go-forward strategy by next month. 

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century-old Penney

JC Penney, century-old mainstay of US malls, declares bankruptcy amid pandemic – The Guardian

JC Penney, the more than 100-year old US department store chain, filed for bankruptcy on Friday, making it the latest business to hit bottom amid the coronavirus pandemic.
The chain, known for selling family apparel, cosmetics and jewelry, is the latest in a…
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Penney talks

JC Penney in talks to fund potential bankruptcy filing next week – CNBC

Robert Barnes | Getty Images

J.C. Penney is in talks to secure financing for bankruptcy as the coronavirus pandemic has devastated the American retail industry, people familiar with the matter tell CNBC. 

The Plano, Texas-based retailer skipped a $12 million interest payment on April 15, starting the clock on a 30-day grace period that could force it to file for bankruptcy as soon as May 15. 

 If J.C. Penney hits the May 15 deadline, it could opt to make the interest payment it owes, but the retailer skipped another $17 million payment Thursday night. The more money it has in bankruptcy, the more ability it has to execute its plan and survive.  

J.C. Penney is negotiating with its first-lien lenders, including H2 Capital, a “debtor in possession” loan of around to $300 million to $500 million, some of the people familiar with the matter said. It had originally hoped for as much as $1 billion in DIP, though that would have included existing debt being rolled over.

The company has also spoken to larger banks about bankruptcy financing, but DIP funds have been harder to come by than for other recent large-scale retail bankruptcies. While large banks contributed DIP to retailers like Toys R Us and Sears, they are less willing to extend such financing efforts now, particularly when they are not existing creditors, people familiar with the situation tell CNBC. As retailers from Macy’s to Nordstrom look to draw down their credit lines, banks must prioritize so that they are lending to those they are most confident can survive.

In its favor, J.C. Penney has an iconic brand and real estate throughout the country. It is buffered by $386 million of cash it had on hand as of February, as well as roughly $1.25 billion it drew from a credit line in March.

The size and nature of DIP financing that J.C. Penney is able to secure may set the tone for additional retail bankruptcies that are expected to come even as states begin to reopen their economies. Preppy retailer J. Crew and high-end department store Neiman Marcus filed for bankruptcy this week. Many more, including rural retail chain owner Stage Stores, are expected to follow suit. 

The pandemic has put the value of assets that retailers have typically used as collateral for financing, such as inventory, into question. There is uncertainty about when stores will reopen to the public and how much stores will compete on discounts to lure back shoppers.

The people requested anonymity because the information is confidential. A spokesperson for J.C. Penney declined to comment. 

Reuters first reported the DIP talks. 

Long-term struggles

J.C. Penney had 846 department stores as of February and employed roughly 90,000 full-time and part-time employees. It reported $10.7 billion in net sales in fiscal 2019, down 8.1% from the year prior.  

On Thursday, it announced it had “reaffirmed” its partnership with cosmetic chain Sephora, after the LMVH-backed company threatened to pull out of mini shops it had in 650 of J.C. Penney’s stores. 

Questions over J.C. Penney’s value come just a few decades after the company made itself a name as the destination for the middle class to do aspirational shopping for clothes and appliances a suburban person of means might want. In 1994, it had roughly 250 stores and generated in $20.4 billion in retail sales, with net income nearing $1 billion.

But Walmart’s growth in 1990s threatened J.C. Penney’s hold on suburban and rural communities. The Great Recession and a failed attempt at a turnaround led by Bill Ackman left it in the hole. It still carries the burden of a $2.25 billion loan it took out to shore up JC Penney’s finances in 2013.

The company brought in Jill Soltau, former CEO of Jo-Ann Stores in October 2018. Soltau had begun to try to revitalize J.C. Penney and bring it back to its roots by focusing on customer service, apparel and low prices.

Under Soltau, the retailer has been slowly whittling its store base, including announcing the closure of six stores in January. Analysts, though, have said J.C. Penney needs to close hundreds of stores to get its business back in good shape. 

CNBC’s Lauren Thomas contributed to this report 

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