Sycamore Partners Reportedly Negotiating To Buy JCPenney

Sycamore Partners, the New York private equity firm that specializes in distressed buyouts, is in preliminary talks to purchase JCPenney, sources told Reuters.

The retailer, which employs 85,000 people, filed for Chapter 11 bankruptcy protection last month after the coronavirus forced it to shut its more than 800 stores, which followed years of weak sales.

Sycamore is considering acquiring the entire company or making an investment in JCPenney, the news service reported. The company has more than $15 billion in capital under management. Its high-profile businesses include office supplies chain Staples, women’s clothing retailer Talbots and department store operator Belk, the company says on its website.

In mid-May, the struggling retailer disclosed that it paid $17 million in interest charges on a secured loan to avoid a default. But it has nearly $5 billion in debt and is still considering its “strategic alternatives.”

JCPenney has also been talking with its landlords, Brookfield Asset Management and Simon Property Group, about possible transactions, the sources told Bloomberg. Under one scenario, Sycamore, Brookfield and Simon would make a joint bid for the retailer.

The Plano, Texas-based company has said it is in discussions about giving lenders control in exchange for reducing its nearly $5 billion of debt. If it cannot persuade enough lenders to approve its plan by July 15, the terms of its bankruptcy loan require JCPenney to abandon its reorganization efforts and pursue a sale.

In a hearing on Thursday (June 4), U.S. Bankruptcy Judge David Jones approved new financing from lenders to assist JCPenney’s operations while it proceeds with Chapter 11 protection. The judge expressed concern that the 118-year old chain needed to restructure quickly to survive, Bloomberg reported.

David Kurtz, a Lazard Ltd. banker representing JCPenney, said during the hearing that four major institutions had signed confidentiality agreements to discuss working with the company and its lenders on the retailer’s restructuring, the news service reported. 

On Thursday (June 4), JCPenney said it plans to permanently close 154 stores and may shut more. It has reopened nearly 500 stores that were closed due to the pandemic, with more reopenings planned.

Sycamore, JCPenney and Brookfield declined to comment, while Simon did not immediately respond to a request for comment from the news service.