LOOKING TO LIQUIDATE
Court approves retailer’s plan to close up shop
TORONTO An Ontario Superior Court judge has given the green light to put Sears Canada into liquidation, effectively spelling an end to the once-vibrant department store and catalogue retailer.
“We recognize that today an order will bring Sears Canada’s 65 years as a national retailer to an end,” Orestes Pasparakis of Norton Rose Fulbright, the lawyer for Sears’s court-appointed monitor FTI Consulting, told Justice Glenn Hainey on Friday.
The retailer filed for bankruptcy protection in June under the Companies’ Creditors Arrangement Act, announcing the layoffs of 2,900 and closing 59 stores, and the stakeholders involved had “remained optimistic that a solution could be found for the rest of the business,” Pasparakis said. Since then, however, “the company has continued to experience significant losses and liquidity issues,” losing in excess of a million dollars a day, according to court materials. It marks the beginning of the end of a long, slow slide for the retailer, whose sales had dwindled to $2.6 billion in 2016 from $6.7 billion in 2001.
Hainey granted the liquidation bid, a move that will see 12,000 employees lose their jobs in the coming days and weeks as sales at Sears’s 130 stores begin on Oct. 19 and run until Jan. 21. The judge also granted a stay of the retailer’s protection from creditors until the following day, Jan. 22.
Brandon Stranzl, the beleaguered retailer’s executive chairman, had been in active discussions to strike a deal with Sears and its advisers until Thursday to keep operating the company as a going concern.
And while Stranzl appeared in court briefly on Friday, no viable bid has been tabled, court heard.
“I never say never,” Susan Ursel, counsel for Sears’s 17,000 former and current employees, said after the Friday hearing in regard to Stranzl’s continued efforts to buy Sears Canada. “That’s not fair to the parties who have been working really hard to find some going concern proposal that can move forward.”
Technically, a bid from Stranzl could be approved up until a day before the liquidation sale begins next week, and Sears would owe its court-approved liquidators a $2.5-million break fee and expense reimbursements of up to $2.05 million.
In the meantime, a deposit made by Stranzl in support of the going concern transaction has been returned to the executive, court heard Friday.
Ursel, who took time to acknowledge the Sears employees who had worked hard for the company since the difficult restructuring process began, said the court process needs “to ensure that the proceeds of the liquidation are maximized, that the value left in the estate that will be used for the benefit of unsecured creditors is as large as possible.”
Last week, court documents revealed that a $500,000 “hardship fund” for laid-off employees was short $200,000, but since then the amount has been paid, Pasparakis said. And lawyers for Sears pensioners are in discussions with the Financial Services Commission of Ontario about winding up the company ’s pension plan, underfunded by an estimated $266.8-million.
There are no immediate reductions to employees’ pension benefits, said Andrew Hatnay of Koskie Minsky, the firm appointed as representative counsel for Sears Canada retirees.
“There will be a claim against the estate for the (pension) deficiency and the actuaries will run calculations as to what the remaining deficit is,” he said after the hearing.
Several issues remain unresolved, including what will happen to Sears products currently under warranty to the retailer and the future of the Viking trademark; Sears had struck a deal to to sell the Viking trademark to Canadian Tire, court heard last week, but another party has claimed a right of first refusal for the trademark.
Court resumes on Oct. 18 to revise an incentive plan for key Sears Canada employees to ensure they remain in their jobs for the next phase of the proceedings.