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J.C. Penney asks to have the weekend to complete details of its bankruptcy exit and sale

Penney is trying to exit Chapter 11 bankruptcy as soon as late November.

J.C. Penney told the bankruptcy court Friday that it would miss its deadline to file documents outlining its reorganization and sale and that it expected to make the disclosures on Monday.

A hearing is scheduled for Tuesday and negotiations that have been underway for months are expected to be completed by then, according to the Plano-based retailer’s filing to extend the deadline.

What’s still being hammered out amounts to millions of dollars in payouts to first-lien secured and unsecured debt holders.

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All involved have consented to and are “actively participating in mediation discussions” with U.S. Bankruptcy Judge Marvin Isgur, according to Penney’s filing. Isgur has been assisting since September in the case, which is assigned to Judge David Jones. Isgur said in the filing that he “believes that substantial progress is being made in the mediation.”

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Penney’s reorganization calls for it to emerge in two pieces.

An operating company with about 700 stores will be sold to its biggest landlords, Simon Property Group and Brookfield Property Group.

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Separately, 160 of those store properties and six distribution centers are being put into a real estate company that will be owned by Penney’s secured lenders, who will rent back the properties to the operating company. That master lease agreement is part of the mediation with the judge.

If the reorganization is completed as outlined, the operating company will no longer own any of its distribution centers but will still own more than 200 stores.

Penney entered bankruptcy in May with 11 distribution centers, five of them leased. Of Penney’s 846 stores, it owned 387, including 110 ground leases. Over the decades since the 1960s, when suburban malls were being developed, it was the practice of large anchor department stores to own their own buildings and parking lots.

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Penney has closed about 150 stores as part of its bankruptcy, leaving it with about 700 stores and 60,000 employees. The 118-year-old retailer is trying to exit bankruptcy before the end of the year, and possibly as early as late November.

A sale hearing is tentatively set for Nov. 2.

“It is absolutely critical to these estates that the [operating company] sale move forward and be approved in early November,” Penney’s filing said. “J.C. Penney will do whatever it takes to ensure that happens.”

Separately, a committee of shareholders who stand to lose the value of their Penney stock have filed motions and documents with the court reflecting their view that the company shouldn’t have filed for bankruptcy in the first place.

Twitter: @MariaHalkias

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