Bankruptcy Judge David Jones said at a hearing yesterday that he will order J.C. Penney Co. to pay as much as $250,000 in professional fees to support an informal group of shareholders who have been challenging the bankruptcy, Bloomberg News reported. In exchange, the group of retail investors agreed to nix its attempt to have the whole case thrown out along with its request for status as an official group, which could’ve resulted in huge legal bills for J.C. Penney. Judge Jones said that he views the compromise as a way to help educate shareholders on where the case is headed and how bankruptcy works. “I’m looking at this as a very reasonable expenditure to further education and promote discussion,” Jones said. “It’s not a war chest.” The news comes on the heels of a surge in the stock prices of J.C. Penney and other bankrupt companies. Some of the retailer’s debt, which ranks well above shares in the repayment line, was valued at just 0.125 cents on the dollar in a credit-default swap auction Tuesday, implying extremely slim odds of any payout to equity investors. Still, J.C. Penney shareholders have been active participants in its bankruptcy proceedings to date. Several have asked questions during hearings, including cross-examining witnesses and pleading with Judge Jones to prevent a wipeout of the stock. In court papers, the informal stockholder group decried recent bonus payments to executives and insisted that bankruptcy could’ve been avoided.
