Sears Canada stock takes a hit following report it will seek court protection

SHARES FALL 22%

TORONTO • Sears Canada’s stock plunged more than 20 per cent Wednesday following a report that it’s preparing to seek court protection from creditors.

The shares fell 22.5 per cent, or 18 cents, to 62 cents on the Toronto Stock Exchange.

The stock has been on a nosedive in the last year — losing more than 80 per cent of its value — and just last week the company warned there was “significant doubt” about its future and that it could be sold or restructured.

Sears Canada didn’t respond for comment.

Bloomberg, citing unnamed people it said were familiar with the matter, reported that the company is preparing to seek court protection from creditors within weeks and that the business could be sold off in pieces.

The Toronto-based retailer and its American counterpart have been suffering from dwindling sales for years as a result of changes to consumer buying patterns and new competition, particularly from online shopping.

In April, Sears Canada announced that its 2016-17 loss was $321 million.

Shareholders rank after lenders and creditors in a court-supervised bankruptcy proceeding, so Sears Canada shares could lose most or all of their value if it files under the Companies Creditors Arrangement Act or Bankruptcy and Insolvency Act.

According to regulatory documents, its biggest direct and indirect shareholder is billionaire Edward Lampert, who also controls the Sears Holding Corp. — a public company that owns Sears and Kmart stores in the United States.

Shares of Sears Holdings, which retains a minority stake in the Canadian operation, dropped more than five per cent Wednesday on the Nasdaq.

Sears Canada has 155 locations leased or owned by the company.

It owns eight full-line department stores, two Sears Home stores, and two outlets and leases the remainder, according to the company’s annual report.

With locations in malls across Canada, the retailer is linked to some of the country’s largest real estate firms. RioCan Real Estate Investment Trust, Canada’s largest landlord by market value, leases nine locations to Sears.

H&R REIT, the country’s second-largest REIT, leases space via its Primaris subsidiary to at least eight Sears stores.