Still, JCPenney probably isn’t going belly up just yet. Ironically, the fact that these are the worst business conditions the company has ever faced could save it in the near term.
But JCPenney’s creditors, including lenders, landlords and vendors, have yet to publicly push for liquidation. This week they agreed to give the company another two weeks to win approval of a turnaround plan it is working on.
Experts say that is partly because the creditors know they would get even less than usual by forcing the company into liquidation.
“What do they have to gain in pushing for liquidation?” said Neil Saunders, managing director and retail analyst at research firm GlobalData. “A liquidation of JCPenney isn’t going to raise much in the short-term. All the values are incredibly depressed. No one is in the market to buy these things. This is a reason for investors to find a short-term fix to keep things going.”
Malls can’t lose yet another tenant
It would make sense for Simon and other creditors to help keep JCPenney alive for now, experts say.
“These mall guys are desperately in need of tenants,” said Mark Cohen, the director of retail studies at Columbia University. “There isn’t anyone seeking to take anchor space in malls. If a landlord buys it, it will keep getting rent. The space doesn’t go dark and become a big black eye. And they can liquidate at will in the future when things improve. Propping it up and keeping the doors open would be the most expedient solution for the moment.”
Despite mall owners’ desires to keep retailers alive, even if only on life support, it’s by no means certain that JCPenney will survive this crisis. Retailers have been known to file for bankruptcy with the intention of staying in business, only to end up closing.
Not long for this world
So JCPenney won’t necessarily win a reprieve, even if liquidation has little to offer its creditors at the moment.
“The next few weeks will be critical in determining the fate of JCPenney, said Reshmi Basu, an expert in retail bankruptcies at Debtwire.
“The lenders are working with advisers to assess the value of the property,” said Basu. “Historically, companies that file for bankruptcy without a plan in hand that has been agreed to by creditors end up liquidating.”
And even if it does get a short-term lease on life, experts don’t see much chance of long-term survival for the company.
“The chance it will recover as a viable retailer is nil and none,” said Cohen.