Another problem for a Chapter 11 reorganization is history. From housewares seller Linens Holding Co. to department store Mervyn's Holdings LLC, to bookseller Borders Group Inc., to electronics retailer Circuit City Stores Inc., bankruptcy files are littered with retailers that went into bankruptcy reorganizations hoping to emerge as stronger companies, but didn't make it.

That's also because, an industry source said, in an asset-rich situation such as J.C. Penney, creditors are more likely to push for liquidation to make sure they get their money back, rather to wait through the normal debt-for-equity swap that tends to accompany reorganization.

But if there is a white knight private equity buyer out there -- Apollo Global Management LLC and Leonard Green & Partners LP were names reported previously to The Deal as being interested -- J.C. Penney's stock price has farther to fall to get private equity interested. Buyout firms wouldn't consider a buyout of J.C. Penney until the stock reached about $5 per share -- the company currently trades at close to $14 per share, a source calculated.

But once J.C. Penney has troughed at that stock price, there is enough value in its brand name and real estate, as well as some of the brands it owns such as Liz Claiborne that it has acquired, for an acquisition to make sense, the source added.

As for Ullman, apparently J.C. Penney approached other candidates before offering him his old job back. Attracting a CEO is difficult for the company, someone familiar with the search process said, not only because of a dearth of available candidates and talent, but also because it doesn't have much cash for implementing new ideas, let alone offer a prospective CEO a lucrative benefits package and salary.

After all, J.C. Penney's board had already slashed Johnson's salary by 97% before they decided to part with him for good.

-- Written by Richard Collings in New York

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