$611 million in Sears Canada dividend payments under review by monitor

TORONTO — Hundreds of millions of dollars of dividends doled out to Sears Canada shareholders are coming under scrutiny by the former retailer’s court-appointed monitor, according to a new report in the company’s insolvency proceedings.

The report also highlights the tens of millions of dollars the failed chain, which faces a more than $260-million pension deficit and has laid off roughly 15,000 employees, has paid for legal representation in the process.

FTI Consulting Canada Inc. will review some transactions, payments and dividends the retail chain entered into, made or declared before it filed for protection under the Companies’ Creditors Arrangement Act, according to the latest report it submitted to the Ontario Superior Court of Justice on Monday.

Of particular interest to the monitor are a $102 million dividend payment on Dec. 31, 2012 and a $509 million dividend payment on Dec. 6, 2013.

The monitor is reviewing documents and gathering additional information, “including engaging with certain independent directors and senior Sears Canada management personnel, who had direct involvement” in at least some of the transactions.

FTI said it will report back to the court if it identifies more transactions it wishes to review.

The dividend payouts came as the company, which closed its last remaining stores this past weekend, struggled financially and grappled with a pension plan shortfall.

When Sears Canada sought approval to liquidate last year, its pension plan was more than $260 million short.

As of Dec. 31, 2015, the pension was 19 per cent short of what it needed to meet its commitments, according to a Sears Canada Retiree Association website.

The report also shows how costly the insolvency process has been for Sears Canada, which up until Jan. 6 of this year has paid nearly $52.9 million in various fees.

That includes more than $28 million total to its law firm and financial adviser.