J.C. Penney said it is still working toward a deal on a going concern sale. The retailer’s advisers told a Texas bankruptcy court on Wednesday that constructive negotiations are still ongoing, and that the company believes it is close to an agreement.
The retailer, which entered into Chapter 11 in May, has in recent weeks highlighted its plans to execute a swift going-concern sale as part of its efforts to reorganize into a property company and an operating one.
J.C. Penney’s attorney Joshua Sussberg of Kirkland & Ellis LLP has told the court that the company has received multiple bids so far, including from first lien lenders who had submitted a bid for the so-called Prop Co. and Op Co., as well as three additional ones for the operating company, which would comprise retail operations, some real estate, inventory and intellectual property.
The ongoing discussions will determine what the bidder group for the company’s business would look like. Sussberg has told the court the retailer believes it is close to a deal. Another hearing on updates in the case is expected to take place next week.
On Wednesday, the retailer also obtained the court’s approval for auction procedures on the sale of several dozen leases on stores that it plans to shut down. Penney’s, which said in June that it is planning to close some 152 locations, has signaled plans to sell the leases on 142 stores that it is in the process of closing. Store closing sales have been ongoing, and the auctions on the leases to be sold are scheduled for Sept. 14 and Sept 15.
“The auction procedures will streamline the debtors’ efforts to capture substantial value from leases that they would otherwise be rejecting,” an attorney for the retailer told the court during the hearing.
The ability to reject and assume leases, which is part of the process in deciding which stores to close and which to keep and often renegotiate the terms on, is a key feature of the Chapter 11 process for retailers. Retailers can also use the bankruptcy process to market leases for sale, and often characterize it as a way to extract value from the leases of stores that are being shut down.
In court filings, J.C. Penney has described these planned lease auctions of stores being closed as part of efforts toward “rationalizing” its real estate assets.
“To that end, the debtors and their advisers have performed a comprehensive review of their real estate portfolio and have commenced the process of rejecting burdensome unexpired leases, conducting certain store closing sales…at certain of the debtors’ locations, and renegotiating the terms of leases where a go-forward location may be feasible,” the company said in a recent court filing.