A lawyer for J.C. Penney Co.’s top lenders accused a rival creditor group of “economic terrorism” during a court hearing on the escalating battle between hedge funds seeking bigger shares of the beleaguered department-store chain, WSJ Pro Bankruptcy reported. Andrew Leblanc, who represents the company’s top lenders, said a competing group of investors including Aurelius Capital Management LP was trying to tie up a planned sale of the company’s retail assets “so they can extract a premium.” Aurelius, Carlson Capital LP and other dissenters are challenging Penney’s preferred path out of bankruptcy, which is backed by top lenders and involves placing the retail operations and most of the company’s stores in the hands of mall owners Simon Property Group Inc. and Brookfield Property Partners LP. Under the restructuring proposal, the remaining stores and distribution centers would be transferred to top lenders including H/2 Capital Partners LLC, Sculptor Capital Management Inc. and Brigade Capital Management LP in exchange for $1 billion in debt forgiveness. At a hearing held via videoconference in the U.S. Bankruptcy Court in Corpus Christi, Texas, a judge authorized Penney to begin soliciting votes from creditors on the proposed restructuring, but not before pointed exchanges between lawyers for the two investor groups. The objecting group, which holds a minority of Penney’s first-priority loans, has said the credit bid is artificially low and designed to overpay the deal participants while siphoning value from the rest of Penney’s creditors.
