Target Canada announced Friday that it has reached a deal with its former landlords that provides the framework for the U.S.-owned retailer to draw up a recovery plan for creditors after filing for court protection almost 14 months ago.

Target Canada said in a statement that the settlement provides that its U.S. parent Target Corp. will make an undisclosed payment to landlords to replace the guarantees that the parent had made to some lawyers to cover future losses in the event that the Canadian division faltered.

In exchange, the landlords will release Target Corp. from the guarantees, it says.

As a result, the monitor overseeing Target Canada’s insolvency proceedings under the Companies’ Creditors Arrangement Act estimates that unsecured creditors will get back between about 66 per cent and 77 per cent of their proven claims.

“This agreement is the result of months of tough negotiations with stakeholders,” said Aaron Alt, Target Canada chief executive officer. “We are delighted to have achieved a consensual path forward and believe that the amended plan is in the best interests of the stakeholders of Target Canada. We remain focused on achieving a timely wind-down of the CCAA proceedings and distributing proceeds to stakeholders as soon as possible.”

Sources have told The Globe and Mail that Target Corp. was ready this week to contribute more than $30-million toward the landlords.

As well, Target Corp. will subordinate “the vast majority” of its intercompany claims to unsecured creditors, today’s statement says. That includes a controversial $1.4-billion that Target Canada owed its parent, which will contribute to the overall settlement.

“We are pleased that we were able to negotiate an outcome that preserves meaningful value for creditors of Target Canada, avoids protracted litigation and is supported by the monitor,” said Tracy Sandler, partner at Osler Hoskin & Hardcourt LLP and lawyer for Target Canada.

“Target Corp. has demonstrated its commitment to a global resolution of the CCAA proceedings through subordination of its claims in the estate and additional cash contributions.”

She said each member of the court-appointed consultative committee, which is made up of Target Canada’s key creditor representatives, supports the filing of the amended plan.

Target Canada will return to Ontario Superior Court on March 14 to seek an extension of the CCAA order. It plans to bring another motion to court on April 13 seeking an order to approve the filing of the amended recovery plan and authorizing a creditors’ meeting to vote on it on May 25. The retailer intends to get court approval of the plan on June 2.