“We’ve hit a stalemate” in negotiations with several outside bidders, Penney’s bankruptcy lawyer, Joshua Sussberg, said Monday during a hearing in U.S. Bankruptcy Court in Corpus Christi, Texas. The company instead will pursue a bankruptcy sale to top lenders, including H/2 Capital Partners LLC, that would hand them equity in exchange for their debt claims, Sussberg said.
“Our lenders are no longer going to be held hostage in negotiations,” he said, adding that Penney intended to negotiate and document the lender deal within the next 10 days.
Putting the retail assets in the hands of lenders wasn’t the first choice for the retailer or the lenders. Andrew LeBlanc, a lawyer for the lenders, said the other bidders “have been a disappointment.”
The company had been in advanced talks with Simon, the biggest mall owner in the U.S. by number of locations, and Brookfield, another big shopping-center owner, to sell them Penney’s retail operations and some real estate. Private-equity firm Sycamore Partners also submitted a bid.
Sussberg said talks had stalled as “negotiating postures and egos have not necessarily been set aside.” In July, he said Penney was “in the red zone” on a Chapter 11 deal that would preserve the business and, along with it, tens of thousands of jobs.
After years of missteps, Penney filed for bankruptcy in May when the coronavirus pandemic shut down nonessential shopping across the country and forced a parade of department stores and other retailers into Chapter 11.
The company, with roughly 70,000 employees, has since reopened stores but about 150 of the 850 locations it had when it entered bankruptcy are closing for good.