Aurelius Capital Management LP is competing with rival lenders to finance J.C. Penney Co. ’s restructuring strategy, accusing them of “predatory lending” and offering to bankroll potential litigation against them, WSJ Pro Bankruptcy reported. The dispute concerns which investors will finance the company’s turnaround efforts, pitting a group of creditors including Aurelius against a competing faction led by H/2 Capital Partners LLC. Penney, which filed for bankruptcy last month, has proposed tapping H/2, Sixth Street Partners and other top-ranking lenders for a $900 million financing package, half of which would provide fresh capital while the other half pays down debt. Shortly before filing for chapter 11, the company paid $45 million to these lenders for their commitment to finance the bankruptcy and is scheduled to submit the loan proposal for final approval on Thursday to the U.S. Bankruptcy Court in Houston. A rival group with claims crossing over senior and junior debt tranches includes Aurelius. It said on Tuesday it had proposed its own $450 million package with “dramatically lower overall costs” and more flexibility for Penney to try to salvage the business and avert a liquidation of its nearly 850 department stores.
