PLANO, Texas – With retail sales falling 44% in the first eight months this year, JCPenney has been hoping to exit bankruptcy in December.
However, it’s proposed purchasing agreeing terms are earning raspberries from a group of lenders who dislike the sale of the company’s real estate.
According to a Bloomberg report, a group led by Aurelius Capital Management argues that their $750 million competing bid for the properties that would provide $600 million more to distribute proceeds among creditors. They’ve requested that the bankruptcy court create a separate process for the property sale, which is currently slated to result in property holding companies made up of 160 Penney real estate assets and its owned distribution centers.
Those property companies are to be owned by JCPenney’s debtor-in-possession and first lien lenders. (Under the JCPenney plan, its retail and operating assets are to be sold to shopping center operators Brookfield Asset Management Inc. and Simon Property Group.)
“The Aurelius-led creditors say that the deal is structured in a way that will deliver a 162.4% recovery for the DIP lenders, while leaving them with a recovery of just 10.3%. Under their competing bid, the DIP lenders would get 100% of their money back while allowing the minority group to recover 46.1% of J.C. Penney’s outstanding $1.57 billion of first-lien debt,” Bloomberg reported.
The bankruptcy judge ordered DIP lenders and landlords to finalize a master lease agreement by Oct. 26, the report stated.
Late Friday, Oct. 23, JCPenney posted its financial performance through the period ended Oct. 3. Sales for the eight months fell 44% to $3.668 billion, with net loss at $1.156 billion compared to a net loss of $316 million in the year-ago period.
The resulted are preliminary, do not include certain quarterly adjustments and other explanatory notes, and have not been audited or reviewed by any independent public accounting firm, JCPenney noted.
For the month of September, sales declined 19% to $528 million. Net loss widened to $100 million from a net loss of $41 million in September 2019.