J.C. Penney’s plan to rescue itself from bankruptcy is facing a challenge.
A group of the company’s creditors is asking the U.S. Bankruptcy Court in Corpus Christi, Texas to slow the sale of J.C. Penney’s real estate to another group of lenders — called the debtor-in-possession, or DIP, lenders — arguing that the pending deal would allow the buyers a 162.4 percent recovery, leaving the other creditors with a recovery of 10.3 percent, according to Bloomberg.
J.C. Penney has been aiming to save about 60,000 jobs by wrapping up the sale of its assets before the holiday shopping season.
Under the agreement, the department store chain’s assets would be bought by the DIP lenders, including H/2 Capital Partners, which provided J.C. Penney with financing while restructuring. The group would then sell the retail operation to mall landlords Simon Property Group and Brookfield Property Partners.
The objecting creditors, led by Aurelius Capital Management, said they submitted a $750 million competing bid for the brand’s properties that would provide $600 million more to the bankrupt estate and more evenly distribute proceeds among creditors. In the filing, they said the current sale structure “reeks ‘of not only greed but abhorrent bad faith,’” Bloomberg reported.
The creditors are asking the court to order two separate sales: one to sell the property to the DIP lenders, and the other to sell J.C. Penney’s operations to the two mall landlords.
A representative for the DIP lenders didn’t immediately respond to Bloomberg’s request for comment. J.C. Penney declined to comment, Bloomberg said. [Bloomberg] — Akiko Matsuda