fashion retailler: Buyout firm Sycamore Partners in talks to buy J.C. Penney

By : Mike Spector and Jessica DiNapoli

NEW YORK : Personal equity business Sycamore Associates is in preliminary talks to get J.C. Penney Co Inc out of personal bankruptcy ought to the U.S. office retail outlet chain’s negotiations with its collectors fail, 3 men and women common with the matter explained on Friday.

J.C. Penney, which employs around 85,000 men and women, submitted for personal bankruptcy defense in May well soon after the coronavirus pandemic compelled it to briefly shut its much more than 800 shops throughout the United States, compounding economic woes that stemmed from many years of dwindling product sales.

Sycamore is weighing acquiring J.C. Penney outright or generating an investment in the troubled retailer, the sources explained.

There is no certainty that the talks involving Sycamore and J.C. Penney will outcome in a deal, which would involve a personal bankruptcy judge’s acceptance, the sources explained.

J.C. Penney is also in contact with some of its landlords, including Brookfield Asset Administration Inc and Simon Home Group , about feasible transactions, the sources explained. Below a single scenario being explored, Sycamore, Brookfield and Simon would be part of forces on a bid for J.C. Penney, two of the sources explained. Wells Fargo & Co is also involved in the conversations, a single of the sources explained.

J.C. Penney shares surged forty seven% soon after Reuters documented on the talks, ending the working day up 55% to shut at 32 cents.

The sources requested anonymity because the conversations are private. Sycamore and J.C. Penney declined to comment. Brookfield had no quick comment though Simon and Wells Fargo did not right away respond to requests for comment.

J.C. Penney is in conversations about handing over manage to its creditors in exchange for decreasing its nearly $five billion of credit card debt. This hinges on a slew of investment corporations that maintain the company’s senior credit card debt and have provided the company’s personal bankruptcy financing agreeing to J.C. Penney’s business plan by July fourteen.

If the Plano, Texas-centered company does not persuade adequate creditors to approve its approach by the pursuing working day, July 15, the phrases of its personal bankruptcy personal loan involve J.C. Penney to abandon its reorganization initiatives and pursue a sale.

It is unclear how considerably Sycamore is prepared to pay for J.C. Penney, which is in the method of forever closing shops and cutting employment.

Sycamore, a New York personal equity business that specializes in retail and purchaser investments, has in the earlier taken manage of higher-profile companies this sort of as business office supplies chain Staples, women’s clothing retailer Talbots and office-retail outlet operator Belk.

Last month, Sycamore walked away from a $525 million deal to acquire a vast majority stake in L Brand names Inc’s Victoria’s Key, as the pandemic hammered product sales at the lingerie chain.

Brookfield and Simon function malls throughout the United States. Brookfield in May well explained it would devote $five billion to non-managing investments developed to revitalize suppliers struggling in the wake of the coronavirus outbreak.

During a court docket listening to on Thursday, U.S. Personal bankruptcy Choose David Jones accredited clean financing from senior creditors to support J.C. Penney’s operations though it navigates Chapter 11 defense, and expressed problem the 118-yr previous chain necessary to restructure swiftly to survive.

In July, the creditors will “make your mind up no matter whether the dream lives or the dream dies,” explained Cathy Hershcopf, a creditors’ attorney, through the listening to.

David Kurtz, a Lazard Ltd banker representing J.C. Penney, explained through the listening to that “4 important establishments” had signed confidentiality agreements to talk about doing the job with the company and its creditors on the retailer’s restructuring. He did not name them.

Sycamore, Brookfield, Simon and Wells Fargo are the 4 unnamed get-togethers, a single of the sources explained.

Below a approach being mentioned with its collectors, J.C. Penney would be split into two companies. A single would be a authentic estate investment have faith in that would maintain some of the company’s assets and lease it again to J.C. Penney. The other would function J.C. Penney’s retail business.

Joshua Sussberg, a Kirkland & Ellis LLP attorney representing J.C. Penney, explained through Thursday’s court docket listening to that the company necessary to persuade creditors negotiating to just take manage of the restructured business to hold it alive and that he prepared to maintain them accountable for how the scenario ended.

Even in less-fraught times, lots of suppliers, including Barneys New York Inc and Toys ‘R’ Us, have unsuccessful to reorganize under personal bankruptcy defense and absent out of business for excellent.

J.C. Penney on Thursday explained it options to forever shut 154 shops, and could shut much more. It has so considerably reopened nearly 500 shops that ended up closed thanks to the pandemic, and options to carry added locations on the web in coming months. Continue to, worries stay that consumers may be gradual to return amid overall health worries and career losses not observed considering that the Terrific Despair.

J.C. Penney is also in search of permission from landlords to skip hire payments for June, July and August, Sussberg explained last week.