Buyout firm Sycamore Partners in talks to buy troubled J.C. Penney

Debt-laden J.C. Penney is cutting jobs and closing some stores. (AFP)
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Updated 07 June 2020

Buyout firm Sycamore Partners in talks to buy troubled J.C. Penney

  • There is no certainty that the talks between Sycamore and J.C. Penney will result in a deal

NEW YORK: Private equity firm Sycamore Partners is in preliminary talks to acquire J.C. Penney Co. Inc. (JCP.N) out of bankruptcy should the US department store chain’s negotiations with its creditors fail, three people familiar with the matter said on Friday. 

J.C. Penney, which employs roughly 85,000 people, filed for bankruptcy protection in May after the coronavirus pandemic forced it to temporarily close its more than 800 stores across the US, compounding financial woes that stemmed from years of dwindling sales.

Sycamore is weighing acquiring J.C. Penney outright or making an investment in the troubled retailer, the sources said.

There is no certainty that the talks between Sycamore and J.C. Penney will result in a deal, which would require a bankruptcy judge’s approval, the sources said.

J.C. Penney is also in touch with some of its landlords, including Brookfield Asset Management Inc. (BAMa.TO) and Simon Property Group (SPG.N), about possible transactions, the sources said. Under one scenario being explored, Sycamore, Brookfield and Simon would join forces on a bid for J.C. Penney, two of the sources said. Wells Fargo & Co. (WFC.N) is also involved in the discussions, one of the sources said.

J.C. Penney shares surged 47 percent after Reuters reported on the talks, ending the day up 55 percent to close at 32 cents. 

The sources requested anonymity because the discussions are confidential. Sycamore and J.C. Penney declined to comment. Brookfield had no immediate comment, while Simon and Wells Fargo did not immediately respond to requests for comment.

J.C. Penney is in discussions about handing over control to its lenders in exchange for reducing its nearly $5 billion debt. This hinges on a slew of investment firms that hold the company’s senior debt and have provided the company’s bankruptcy financing agreeing to J.C. Penney’s business plan by July 14.

If the Texas-based company does not persuade enough lenders to approve its plan by the following day, July 15, the terms of its bankruptcy loan require J.C. Penney to abandon its reorganization efforts and pursue a sale.

It is unclear how much Sycamore is willing to pay for J.C. Penney, which is in the process of closing stores and cutting jobs.

Sycamore, a New York private equity firm that specializes in retail and consumer investments, has in the past taken control of high-profile businesses such as office supplies chain Staples, women’s clothing retailer Talbots and department-store operator Belk.

Last month, Sycamore walked away from a $525 million deal to buy a majority stake in L Brands Inc’s (LB.N) Victoria’s Secret, as the pandemic hammered sales at the lingerie chain. 

Brookfield and Simon operate malls across the US. Brookfield in May said it would devote $5 billion to non-controlling investments designed to revitalize retailers struggling in the wake of the coronavirus outbreak.

During a court hearing on Thursday, US Bankruptcy Judge David Jones approved fresh financing from senior lenders to aid J.C. Penney’s operations.


India opens vast railway network to private players

Updated 02 July 2020

India opens vast railway network to private players

  • The 167-year-old train network carries 20 million passengers daily
  • India’s railway ministry said it would now permit businesses to run trains along 109 routes
MUMBAI: India has opened up its vast railway sector to private companies, allowing firms to operate trains on certain routes, in a bid to boost its stuttering, virus-hit economy.
The 167-year-old train network carries 20 million passengers daily but is plagued by deadly accidents, rickety infrastructure, lack of modern amenities and poor investment.
In an announcement late Wednesday, the railway ministry said it would now permit businesses to run trains along 109 routes, inviting bids from firms weeks after New Delhi opened up coal mining to the private sector.
“This is the first initiative of private investment for running passenger trains over Indian Railways network,” the ministry said in a statement.
“The objective of this initiative is to introduce modern technology rolling stock with reduced maintenance, reduced transit time, boost job creation, provide enhanced safety, provide world class travel experience to passengers,” it added.
The project will require an investment of $39.8 million and private players will have to pay the government fixed haul charges and a percentage of profits determined during the bidding process.
Prime Minister Narendra Modi has sought to privatize a range of industries that have been under state control for decades, sparking criticism from the opposition Congress party.
“Now the government is in a desperate mood to sell a great chunk of one of our largest national asset #IndianRailways,” Congress politician Adhir Ranjan Chowdhury tweeted.
“Privatization cannot be construed as a panacea of railways malady,” he added.
The tottering network is notorious for accidents, with 15,000 passengers killed every year according to a 2012 government report that described the deaths as a “massacre.”
Asia’s third-largest economy has been clobbered by the pandemic and a months-long lockdown, growing at its slowest pace in at least two decades last quarter.
The shutdown, which put millions out of work overnight, is widely expected to plunge the country into recession.
Fears for the economy prompted the government to allow many businesses to resume operations starting last month despite an ongoing increase in infections, which have now crossed 600,000.
Even before Modi announced the lockdown in late March, the economy was struggling to gain traction with sluggish growth, record unemployment and a flurry of bad loans making banks reluctant to lend.