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Talks were on with three potential bidders, including mall owner Simon Property Group and Brookfield, to save department store chain Jessie Penney – and possibly keep hundreds of stores open for business.
But according to the department store chain’s attorney, a “deadlock” has struck since those discussions and time is running out to keep the company alive.
Penny’s top lenders, which include H / 2 Capital Partners, are now set to make a credit bid to own the retailer as a standalone company, Kirkland & Ellis lawyer Joshua Sausberg told the bankruptcy court on Monday Said during the hearing. He said that the transaction should be completed within 30 days.
“Our lenders can no longer be held hostage in negotiations with third parties,” Sausberg said. “While it is possible that one of the bidders gets back into the transaction, we can no longer allow 70,000 jobs and negotiating currencies to stand as our vendor base.”
He added that Penny is ready to close several additional stores, as talks have taken place with bidders. The department store chain announced last month that it would lay off about 1,000 employees, as it went ahead with closing about 150 locations across the US. When it filed for bankruptcy, it still operated about 860 stores.
“Many locations that were on our original closing list, but were removed … due to negotiations … will be closed immediately,” Sausberg said.
Penny filed for Chapter 11 bankruptcy protection on May 15, was weighed down by debt and suffered by the coronavirus epidemic.
In late July, Susberg said during a virtual hearing that Penny is moving forward with a sale set to be completed this fall. A liquidation “was not in the cards,” he said at the time. Penny was planned to split into an operating company and two asset holding companies, one with distribution centers for the company, which would be structured like real estate investment trusts.
The three bidders for Penny included the pair of private-equity firms Sycamore, Simon & Brookfield, and Hudson’s Bay Company, owner of Saks Fifth Avenue, according to a person familiar with these discussions.
Simon has already bankrupted two other retailers during the epidemic with the help of apparel licensing firm Authentic Brands Group. Together, they have acquired men’s suit maker Brooks Brothers and denim retailer Lucky Brand. David Simon, CEO of Simon Property, has said that the company is on the hunt for more deals to make money and preserve recognized brands.
Sasberg said Monday that Penny was at the forefront of its negotiations with bidders who were landlords of more than 160 Penny department stores, not directly naming Simon and Brookfield. But as those people have hit a wall and sellers are waiting with “baith breath” whether the company will make it for the holidays, Penny is proposing a standalone transaction, he said.
J. Dozens of retailers, including Crew and other department store chains Neiman Marcus and Lord & Taylor, have filed for bankruptcy during the Kovid-19 crisis. Lord & Taylor announced plans last week to phase out the remaining 38 of its stores.