J.C. Penney (JCPN.Q) says it's continuing to make progress on its planned deal to sell itself to Simon Property Group (SPG -1.05%) and Brookfield Property Group (BPY), and if the courts approve its sale, the retailer should exit bankruptcy before the holiday season.

The mall operators are seeking to purchase the department store chain for $800 million, which would salvage some 650 stores and 70,000 jobs.

Lines of people outside of J.C. Penney store

Image source: J.C. Penney.

Keep a bad situation from getting worse

J.C. Penney was in deep financial trouble well before the coronavirus pandemic, but the temporary closure of nonessential businesses this spring -- which shuttered all of its brick-and-mortar locations -- pushed the retailer over the edge.

That, in turn, risked creating substantial problems for the mall operators. If the venerable chain shut down completely and liquidated its inventory (as some of its creditors wanted), that would leave yawning gaps in their malls.

J.C. Penney has a presence in 63 of Simon's shopping malls -- about half of them -- and it's in 99 of Brookfield's. Although the landlords could conceivably have subdivided those large spaces and rented them out to multiple occupants, retailers are finding the pandemic an inopportune time to expand their physical store footprints, so Simon and Brookfield might have been hard-pressed to find new tenants. Retailers such as Macy's (M -1.13%) have said they are deprioritizing malls in their growth plans.

J.C. Penney CEO Jill Soltau, however, is looking to make a comeback after the sale is approved. In a press release, she called the deal "an important milestone in our restructuring," expressing confidence that the bankruptcy judge will approve it at a hearing scheduled for early November. That favorable ruling would pave the way for the retailer to exit bankruptcy before the holiday shopping season gets fully underway.