Private Equity: Real Estate Firms Eye J.C. Penney
Private equity firm and Real Estate Investment Trusts are having discussions about buying J.C. Penney (NYSE:JCP) if the bankrupt retailer does not reach an agreement with creditors.
The department store filed for bankruptcy in May after the spread of the coronavirus forced the retailer to close more than 800 stores across the country. J.C. Penney had been struggling to survive for the past few years, and the virus was the final nail in its coffin.
J.C. Penney Might Be a Target
Sycamore Partners is said to be the leading candidate to buy the company should negotiations fail. Sycamore specializes in retail. The private equity firm owns several retailers, including Dollar Tree, Hot Topic, Staples, The Limited, and several other chains. Sycamore had a deal to buy Victoria’s Secret form L Brands (LB), which fell apart when the chain had to close stores and miss rent payments because of the pandemic.
Another scenario involves Sycamore joining with J.C.Penney’s biggest landlords, Brookfield Asset Management (BAM), and Simon Properties (SGP) to buy the retailer. Wells Fargo (WFC) is also said to be involved in the discussions, although it is unclear what role the bank would play in a deal for the department store.
J.C. Penney is in discussions about handing over control to its lenders in exchange for reducing its nearly $5 billion of debt. This would depend on several investment firms that hold the company’s senior debt and have provided the company’s bankruptcy financing agreeing with the proposal by July 14. If they cannot reach an agreement with the lenders by the date, Penney will have to abandon the reorganization plan and look for a buyer.
The plan being discussed would result in J.C. Penney being split into two companies. One would be a real estate investment trust that would own the company’s property and lease it back to J.C. Penney. The other would operate J.C. Penney’s department store business.
Any reorganization plan or sale of J.C. Penney would require the approval of the bankruptcy court.
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