Skip to main content
Canada’s most-awarded newsroom for a reason
Enjoy unlimited digital access
$1.99
per week
for 24 weeks
Canada’s most-awarded newsroom for a reason
$1.99
per week
for 24 weeks
// //

A J.C. Penney store is seen in Oceanside, Calif., on July 31, 2019.

Mike Blake/Reuters

J.C. Penney Co Inc’s talks with landlords for a rescue from bankruptcy proceedings reached an impasse, pushing the department store to the brink of collapse unless it can reach a deal within days to be taken over by lenders.

Discussions between the Plano, Texas-based retailer and a duo of mall owners Simon Property Group Inc and Brookfield Property Partners LP stalled over the weekend, Joshua Sussberg, a J.C. Penney lawyer at Kirkland & Ellis LLP, said during a Monday court hearing.

The negotiations have dragged on in part over lease terms, according to people familiar with the matter. Sussberg did not detail that or any other specific sticking points during Monday’s hearing.

Story continues below advertisement

Sussberg said lenders were still prepared to rescue the 118-year-old company and more than 70,000 jobs depending on negotiations over the next 10 days.

A lawyer for the lenders, Andrew Leblanc of Milbank LLP, said there were “lots of hurdles” to reaching such a deal, describing negotiating an agreement on a short time frame as a “heavy lift.” The two sides set a Sept. 10 deadline.

Simon did not immediately respond to a request for comment while Brookfield declined to comment.

J.C. Penney, which filed for bankruptcy in May after the coronavirus pandemic forced it to temporarily close the nearly 850 stores it operated at the time, is racing to reach a deal that would carve it into three parts.

One would be an operating company housing its retail business, including intellectual property and hundreds of stores. Lenders would forgive portions of J.C. Penney’s $5-billion debt load to take control of two real estate investment trusts. One would hold 160 properties, with the other controlling the company’s distribution centres, Sussberg said.

J.C. Penney had hoped to reach a deal with Simon and Brookfield to take over the company’s retail operations. Sussberg said negotiations with the duo were in the “red zone” earlier this month before hitting roadblocks, including an offer from the company submitted to the landlords over the weekend that received no response.

The development will force J.C. Penney to close additional stores that at one point might have been saved, Sussberg said.

Story continues below advertisement

U.S. Bankruptcy Judge David Jones had previously urged parties to set aside what he labelled egos and negotiating postures to get a deal done.

“I hope everyone realizes how serious I am about this. I know where this is headed,” Jones said during Monday’s hearing. He told a shareholder that declining to allow J.C. Penney to continue talks with lenders would result in all the company’s stores closing and “the death of an entity.”

J.C. Penney’s lenders, which include hedge funds and private-equity firms financing its bankruptcy case, have now agreed to explore forgiving debt to also take control of the company’s retail operations in addition to the two real estate investment trusts they envisioned owning.

“Our lenders are no longer going to be held hostage,” Sussberg said. “Time is not our friend.”

Buyout firm Sycamore Partners and Saks Fifth Avenue owner Hudson’s Bay Co have also held discussions with J.C. Penney to take control of its retail business without reaching a deal, people familiar with the matter have said.

J.C. Penney continued talks with those suitors over the weekend, Sussberg said, though they did not reach any agreement. Sycamore and Hudson’s Bay both declined to comment.

Story continues below advertisement

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies