Can Sycamore Partners acquire JC Penney out of bankruptcy?

American department store chain with presence in 846 locations across US states and Puerto Rico, becomes the biggest retailer to file for bankruptcy due the crippling effect of the pandemic. In addition to department stores, JC Penney also has a large Fine Jewelry Department, Sephora inside JC Penney, The Salon by InStyle. They also house many leased departments like portrait studios, optical centers, and Seattle’s Best Coffee. JC Penney was founded in the year 1902 and they have their headquarters in Plano, Texas, U.S.

In pursuit of shrinking their footprint, in their first post-bankruptcy phase they will start closing about 154 stores from next week. As per their report, it will take about 16 weeks to complete this procedure.

JC Penney filed for bankruptcy protection in the month of May. Penney is the third retailer to file for bankruptcy protection, the first one being another US retail giant, J. Crew Group and they were followed by Neiman Marcus. All of them were totally debt laden and the nation-wide shop closures due to the virus-imposed lockdown was the final nail in the coffin.

In their second post-bankruptcy phase, JC Penney plans to completely shut down nearly one-third of their 846 stores within the next two years. They plan to operate in only about 600 locations.

Despite all these, private equity firm Sycamore Partners showed interest to acquire J.C. Penney Co Inc. and pull them out of bankruptcy. J.C. Penney employs about 85000 people was completely debt-laden with dwindling sales over the years.
Sycamore Partners is yet to decide whether to acquire the entire company outright or just make an investment in this troubled company. There is no absolute surety that the deal will take place or not because it will depend on the discretion of the bankruptcy judge’s approval.

J.C. Penney is also in a negotiation with few of its landlords like Simon Property Group and Brookfield Asset Management Inc. It might be so that Sycamore Partners, Brookfield Asset Management Inc and Simon Properties might bid for J.C Penney by joining forces.
J.C. Penney is also in a negotiation with its lenders that in exchange for reducing the entire debt of $5 billion, the control over the company will be handed over to them. The abiding condition is that if J.C Penney fails to persuade enough of lenders by July 15, they must sell of the company and abandon their effort of reorganizing the company. It is also unsure that to what extent is Sycamore is willing to pay for this troubled retailer when they already started to cut-off jobs and close 154 of its stores. Even in less difficult times top retailers such as Barneys New York Inc and Toys ‘R’ Us, could not succeed to reorganize themselves under the bankruptcy protection.