J.C. Penney Co Inc has reached a tentative deal with landlords and lenders valued at $US1.75 billion ($A2.41 billion) to rescue the beleaguered US department store chain from bankruptcy proceedings.

The agreement seeks to avert a liquidation threatening roughly 70,000 jobs and representing one of the most significant US business collapses following the coronavirus pandemic.

Mall owners Simon Property Group Inc and Brookfield Property Partners LP had teamed up to acquire J.C. Penney’s retail operations and were putting the finishing touches on an agreement, Joshua Sussberg, a lawyer representing the company, said during a court hearing on Wednesday.

The deal will carve J.C. Penney into three pieces.

In addition to the retail operations the landlords are purchasing, lenders will take control of two other entities housing some J.C. Penney stores and the retailer’s distribution centres.

The landlords are poised to put $US300 million toward the rescue and have agreed to a nonbinding letter of intent with J.C. Penney, Sussberg said.

The operating company they are acquiring would assume $US500 million of debt.

J.C. Penney plans to move at “lightning speed” to seek approval from a bankruptcy judge in early October, Sussberg said.

“We are in a position to move this into the endzone,” he told U.S. Bankruptcy Judge David Jones, noting that previous talks were in the “red zone” before faltering and then gaining renewed traction.

J.C. Penney expects to emerge from bankruptcy before the 2020 holiday season, the company said.