J.C. Penney seeksmore time to complete bankruptcy plan

J.C. Penney told the bankruptcy court Friday that it will miss its deadline to file documents that outline its reorganization and sale and it expects 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 motion filed to extend the deadline to Monday.

What’s still being hammered mounts to millions of dollars of payout to various first lien secured and unsecured debt holders.

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

Plano-based Penney’s reorganization calls for it to emerge in two pieces. The operating company with about 700 stores will be sold to its biggest landlords, Simon Property Group and Brookfield Property Group.

Separately 160 stores and six distribution centers are being put into a property 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 ongoing mediation with the judge.

If completed as outlined, Penneywill no longer own any of its 11 distribution centers, but it 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 owned387 including 110 ground leases. Over the decades since the 1960s when suburban malls were being developed, it was the practice for the department stores to own their own buildings and parking lots.

Penney has closed about 150 stores as part of its bankruptcy this month leaving it with about 700 stores and 60,000 employees. The118-year-old retailer is trying to exit bankruptcy before the end of the year.

A sale hearing is tentatively set for Nov. 2. “It is absolutely critical to these estates that theOpCo (operating company) sale move forward and be approved in early November,” the filing said. “J.C. Penney will do whatever it takes to ensure that happens.”

Separately, an ad hoc equity committeemade up of shareholders who stand to lose the value of their Penney stock, have filed motions and documents with the court reflecting their view that Penney shouldn’t have filed for bankruptcy in the first place.