Investor Power Struggle at JC Penney
JC Penney has made a 45-million-dollar commitment to secure 900-million-dollars’ worth of interim financing. The deal gets bankruptcy over and done with quickly, but it requires the retailer to write up a new business plan and re-enter the corporate world as a real estate investment trust. The firm doesn’t want to give up, it wants to restructure, but there was a better deal on the table and investors are furious it was refused!
This $900 million deal was offered by a group of senior secured lenders, and another $900 million deal was offered by a group of junior unsecured lenders. The junior’s didn’t ask for a $45 million commitment fee and would even give JC Penney free rein to decide its future and perhaps close fewer stores and save more jobs. However, seniors are seniors.
The retailer owes its senior debtors more than its junior debtors, so the seniors debtors are using that to their advantage. They’re saying that if the firm doesn’t accept their deal and future vision, they’ll push for chapter seven bankruptcy, a ruthless asset strip that will result in total death for the company, instead of allowing the firm to restructure. It’s “predatory lending,” according to the juniors. A hearing is taking place today!
These investor wars are becoming all too common and can pummel a stock still trading when they break out. The shares here would be down big if they hadn’t ceased trading, and would rise if the juniors got justice. It could be that both groups are fighting over scraps; JC Penniless could fail in restructuring. Will we ever see it again?