Private equity firm Sycamore Partners is said to be in early talks to snap up debt-strapped J.C. Penney Co. Inc (JCPNQ) out of bankruptcy should the U.S. department store chain’s negotiations with its creditors break down.
Shares in the retailer spiked 55% to $0.32 as of Friday’s close. According to three Reuters sources, Sycamure is mulling an acquisition of J.C. Penney or making an investment in the troubled retailer.
J.C. Penney last month filed for bankruptcy protection proceedings. The retailer is in discussions about handing over control to its lenders in exchange for reducing its nearly $5 billion of debt.
As part of its “renewal” plan, the Plano-based company said it will also streamline operations, permanently close 154 stores and spin off a real estate division in a move to come back in a stronger position. It has about 850 stores across the U.S. and Puerto Rico.
There is no certainty that the talks between Sycamore and J.C. Penney will culminate in a deal, which would be subject to a bankruptcy judge’s approval, the sources told Reuters.
Amazon.Com Inc. (AMZN), has also been touted to be interested in buying the ailing retailer in a deal that would bolster the world’s largest online retailer’s apparel business.
J.C. Penney had $500 million in cash on hand as of the Chapter 11 filing date in May. In addition, the company received commitments for $900 million in financing from its existing first lien lenders, which includes $450 million of new money.
Wall Street analysts are bearish on J.C. Penney’s stock with 2 Sells and 1 Holds adding up to a Moderate Sell consensus. The $0.23 average price target indicates 29% downside potential in the shares in the coming 12 months. (See J.C. Penney stock analysis on TipRanks).
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