Private Equity Firm in Talks to Buy Out Bankrupt JCPenney, Says Report
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A private equity firm, Sycamore Partners, is reportedly considering buying out bankrupt J. C. Penney Company Inc. should the beleaguered retailer’s negotiation with creditors fail.
According to Reuters, Sycamore is in preliminary talks to either buy JCPenney outright or to make an investment in the department store chain. It is uncertain how much Sycamore would be willing to pay for JCPenney, or whether the talks will result in a deal, says Reuters. Representatives from JCPenney and Sycamore both declined to comment on the reported discussions.
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JCPenney, which was founded 118 years ago, filed for Chapter 11 protection on May 15. According to court documents, the retailer had $500 million in cash at hand and received debtor-in-possession financing commitments of $900 million. The company listed assets in the range of $1 billion to $10 billion — the same as its estimated liabilities. As part of its bankruptcy plan, JCPenney expects to close 242 doors, or about 29% of its fleet, by February 2021. A first round of closures, including 154 stores across 20 states, will begin this summer. The company, which employs about 85,000 people, also is in the process of reducing its staff.
Prior to its bankruptcy filing, JCPenney had for several years struggled with declining sales, numerous leadership changes and increased digital competition. Since taking the helm in October 2018, CEO Jill Soltau has shut down underperforming stores and brought on new talent to revive the business. What’s more, the company hired debt restructuring advisers in July 2019 as part of its turnaround plan, as well as experimented with new strategies including tapping into the outdoor and consignment markets and launching a curbside pickup program. However, investors had largely lost faith in the retailer, pushing its stock below $1 and putting it at risk of being delisted from the New York Stock Exchange. And that was before the coronavirus pandemic, which caused the chain in March to furlough workers and take additional actions to maintain its financial flexibility.
Sycamore, a New York-based firm specializing in retail and consumer investments, has current investments in apparel and accessories brand The Limited and department store operator Belk. The firm has reached a $525 million deal in February to take a majority stake in Victoria’s Secret from L Brands Inc., but opted out amid the coronavirus crisis.
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