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A Canadian flag flies on a vehicle parked outside a Target store in Hamilton, in this January 15, 2015, file photo.PETER POWER/Reuters

Target Canada was close to a deal with its key creditors on Thursday that could pave the way to ending the U.S.-owned retailer's year-long-plus insolvency saga.

Target Canada collapsed under court protection on Jan. 15, 2015, closing all 133 of its stores here within three months and letting go its 17,600 employees.

Its original recovery plan in late November had proposed that many unsecured creditors would be paid 75 to 85 per cent of their proven claims. But it would have meant much less for some of its landlords, who vigorously opposed the plan. In an unusual move, the Ontario Superior Court struck down the plan in January.

On Thursday, U.S. parent Target Corp. was ready to kick in an additional $30-million-plus for the former landlords, industry sources said. And the latest proposal would reduce the amount other unsecured creditors – mostly suppliers – would get by about 8 per cent of their proven claims from what they would have got in the original proposal, and directs those funds to the landlords, sources said.

Under the latest proposal, unsecured creditors would get between about 67 and 77 per cent of their proven claims rather than between 75 and 85 per cent, as had been proposed late last year, sources said.

The parties were in confidential talks late Thursday and the agreement could still be revised. Target Canada is to present the court on Friday with a landlord deal.

Target Corp. has also agreed to let creditors get their hands on a controversial $1.4-billion of intercompany claim that could have landed in its corporate coffers. In the original plan, Target, in exchange, had proposed that landlords accept a formula of payments that would have released the parent company from having to guarantee future lost rents for some landlords.

Justice Geoffrey Morawetz rejected the plan for reneging on a promise Target had made to the landlords to cover their future losses in the event that the retailer collapsed here.

In January of 2015, Target Canada got court protection under the Companies' Creditors Arrangement Act, owing unsecured creditors roughly $2.6-billion. At the beginning of the proceedings, an affiliate of Target Corp. had agreed to essentially allow unsecured creditors to get their hands on $3.1-billion of intercompany claims that Target Canada owed to its parent. But it soon became apparent that the parent company had another $1.4-billion of intercompany claims – and now it is prepared to give that money to creditors also, sources said.

Even so, Target Canada's former in-store pharmacists are still battling in court to get back more money. They have filed for $152.8-million of claims but the monitor overseeing the Target insolvency case has only allowed $18.2-million of those claims as "proven" ones.

William Sasso, the lawyer for the pharmacists, said about 80 of them continue to dispute their assessments. The franchised pharmacists had invested heavily to set up their operations for Target's much-touted arrival in 2013, encouraged by projections of high-volume prescription sales and heavy shopper traffic that didn't materialize.

The pharmacists haven't been a member of the creditors' consultative committee that was formed to help the retailer draw up its recovery plan, said Mr. Sasso of Sutts Strosberg LLP in Windsor, Ont. The talks have been held in secret, without input from the pharmacists.

Target's plan last November had aimed to avoid costly and protracted litigation with creditors while gaining speedy approval from them. To help hasten the process, Target came to a $132-million settlement with its largest landlord, RioCan Real Estate Investment Trust, in which RioCan released Target from its lease guarantees last fall. The agreement may have helped Target win enough votes for the plan to get a green light, but landlord opposition ultimately derailed a fast resolution.

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