Negotiations for the proposed sale of J.C. Penney Co. Inc. to one of the biggest department store operators in America have hit a snag - putting the retailer on the brink of collapse.
Creditors are ready to jump in and take full control of the company as talks with prospective investors hit a deadlock, a lawyer for J.C. Penney said in bankruptcy court proceedings Monday. "We have just reached a stalemate," Joshua Sussberg of Kirkland & Ellis LLP is reported by CNBC as saying.
Takeover talks with three likely bidders had been continuing and may have kept hundreds of J.C. Penney shops operating. The company's leading creditors, which include H/2 Capital Partners LLC, are prepared to make an initial offer to acquire the U.S. department store chain as a self-sustaining entity to prevent liquidation, Sussberg said.
J.C. Penney filed for Chapter 11 protection at a bankruptcy court in Texas in May. The lenders can no longer be held "hostage" by external bidders, Sussberg added. The retailer will continue to consider its options over the bids, Sussberg said, while it strikes out an agreement with creditors for a debt-for-equity arrangement in the coming days.
During determinations in court over the company's current status, Sussberg said they would do everything "humanly possible" to guarantee J.C. Penney remained in business for as long as possible. Last month, the company said it would lay off around 1,000 staff.
But allowing creditors to manage the company's assets wasn't the first course of action by J.C. Penney or its investors. According to lawyer Andrew LeBlanc, who represents the lenders, the other prospective buyers were "a disappointment."
Following years of setbacks, J.C. Penney filed for bankruptcy protection in May when the coronavirus forced the group's nonessential locations across the U.S. to shut down. A host of other department stores other retailers followed suit, Fox Business reported.
The Plano, Texas-based retail group, with approximately 70,000 workers, has since embarked on a series of reopenings but 150 only of its 850 branches are being permanently closed during the bankruptcy filing.
