Sears gets OK to seek buyer
Struggling retailer also reaches deal to offer employees, pensioners a lifeline
Sears Canada can begin soliciting potential buyers, an Ontario judge ruled Thursday, three weeks after the struggling retailer filed for creditor protection.
Ontario Superior Court Justice Glenn Hainey approved the motion for the sale and investor solicitation process after several hours of negotiations between lawyers representing the company, its lenders and retirees and laid-off employees, according to The Canadian Press.
Sears Canada also reached a deal with its lenders and lawyers representing employees to extend benefit and pension payments to the end of September. The company had initially said it would seek court approval to immediately suspend health, dental and life insurance benefits, as well as special payments to the company’s underfunded defined benefit pension plan.
In a report filed by the courtappointed monitor in the case on Wednesday, the company agreed to extend benefit payments, as well as pension payments, until Sept. 30. The extension will “provide a helpful extended transition period for beneficiaries under the ... plan before their benefits are suspended and potentially terminated,” the monitor said in a report filed with the Ontario Superior Court of Justice.
On Thursday, dozens of former employees packed a downtown Toronto courtroom to hear the proceedings.
Lawyers spent most of the afternoon making amendments to the sales and investment solicitation process, which is intended to “solicit a broad range of potential transactions,” according to the monitor’s report.
According to the decision approved by Hainey, Sears and its court-ordered monitor, FTI Consulting Inc., can select one or more successful bids by Oct. 25.
The monitor’s report also said that more than 20 parties have signed non-disclosure agreements with Sears Canada in connection with a potential sale process.
The retailer is still negotiating non-disclosure agreements with its two biggest shareholders, ESL and Fairholme Capital Management, LLC. On Monday, ESL issued a press release saying ESL and Fairholme were “evaluating, discussing and considering a potential negotiated transaction with (Sears Canada) and its subsidiaries.”
In separate documents filed by Sears Canada’s lawyers prior to Thursday’s hearing, its chief financial officer said it is “crucial” to begin liquidation sales of inventory no later than July 21 and to complete them by Oct. 12. Hainey is expected to hear that motion on Tuesday.
Ken Eady, a former Sears Canada employee and representative for retired employees, said while the extension of benefit payments will give former employees more time to find other insurance, he remains concerned about the underfunded pension plan, which has a deficit of almost $267 million.
“The key for us is the pension fund,” said Eady.
“The only place that that money can come from is the proceeds of whatever happens next. It’s our hope that there is money there for us.”
Peter Myers, a former senior director of planning at Sears Canada who worked at the company for more than 35 years until he was laid off in June, was among the former employees who attended Thursday’s court proceeding.
Myers, who starred in a 2014 Sears commercial alongside his brother, actor and comedian Mike Myers, expressed frustration Thursday about how the company failed to adapt to a changing retail economy.
“It’s something. But it’s not considered a victory,” he said.
“It’s a sad story overall .... A lot of the profits that were siphoned out through dividends could have been used to modernize the company.”
The company filed for creditor protection in Ontario Superior Court on June 22, at the same time that it announced the layoffs of 2,900 employees and the closure of 59 stores.
The company’s cash position on its balance sheet fell $164.4 million in the first quarter of 2017, from $349.8 million at the same time in 2016.
It’s a sad story overall . ... A lot of the profits that were siphoned out through dividends could have been used to modernize the company.