Sears Canada pension ‘saga is not over yet’
The provincial NDP is putting pressure on the Liberal government to protect pensioners in bankruptcy proceedings, such as the 18,000 Sears Canada employees and retirees facing the possibility of reduced payouts due to the retail chain’s insolvency.
“This government is failing pensioners,” Oshawa MPP Jennifer French said during Question Period at Queen’s Park on Wednesday, calling on Premier Kathleen Wynne to make changes.
“Last year, the premier — actually, everyone in this whole House — supported my motion to protect pensioners by prioritizing them during bankruptcy proceedings. Now, the premier is saying that there isn’t a role for government. Now, she doesn’t seem to think they deserve her help,” French said.
Judge says other creditors in company’s insolvency are not to be paid until the issue affecting 18,000 retirees and beneficiaries is addressed
“Why did the Premier go back on her word and decide that pensioners should be left to fend for themselves?”
Finance Minister Charles Sousa said the government is taking steps to reform pensions across the province to protect the interests of pensioners, which he said French is aware of.
“It’s certainly an issue of great concern for all of us when any company is faltering on their commitments,” Sousa said, adding that Ontario is the only province that offers a pension guarantee that would help reduce the impact of a pension deficit.
“We’ve recognized that the assets of the pension must be supported. We are working to ensure that Sears, which does remain an operating company at this point, is continuing. FSCO (Financial Services Commission of Ontario), which administers the PBA (Pension Benefits Act), including the pension benefits guarantee, is also monitoring the situation.”
A spokesperson for Sears Canada declined to comment. A motion by the lawyer representing the pensioners to wind up the Sears Canada pension fund was postponed on Tuesday, but Ontario Superior Court Justice Glenn Hainey also ordered that other creditors in the company’s insolvency are not to be paid until the issue is addressed.
“There shall be no distributions to other creditors . . . prior to the final determination of the Wind Up Motion,” Hainey wrote in the order.
There are approximately 18,000 retirees and beneficiaries who rely on receiving monthly pension benefits from the Sears Canada Plan, which is underfunded by about $270 million.
According to documents filed with the court in support of Tuesday’s motion, a group of 6,000 retirees has since November 2014 been requesting that the defined benefit part of the plan be wound up in order to disengage it from the failing company.
Winding up the plan would require the company to pay the full amount of the deficit, and could also trigger a payment into the plan by the Ontario Pension Benefits Guarantee Fund that would help offset underfunding, according to the court documents.
Hainey said the issue is to be heard no earlier than on Nov. 30.
“It’s a step in the right direction I would say, though this is still an outstanding issue,” said Andrew Hatnay, of Koskie Minsky LLP, which represents Sears Canada employees and retirees. “This saga is not over yet.”
Sears Canada filed for creditor protection on June 22 in order to restructure, and is closing 59 stores and letting go 2,900 employees in an effort to emerge a slimmer, profitable business.
It is looking for a buyer for some or all of its operations.
Sears Canada has said it cannot continue to make payments on the pension deficit.
“I don’t know if the word victory is right, but it’s a good interim order, it protects them pretty well.”
LOU BRZEZINSKI PARTNER, BLANEY MCMURTRY LLP
Hatnay said that whether or not the company will end up with $270 million to add to the pension fund would depend on how much it is able to raise during the sales process, which will take several more weeks to conclude.
“I think that is going to be answered in the next phase of this file, which is when the sales process is concluded, which will take we think several months,” Hatnay said. “And then we’ll see how much they have sold and how much they have collected from the sales. So that is yet to be determined.”
Justice Hainey’s order does not affect payments to those engaged in the current legal process, including the trustee and company providing financing to Sears Canada.
“This is a win for the pensioners,” said Lou Brzezinski, a partner with Blaney McMurtry LLP. “I don’t know if the word victory is right, but it’s a good interim order, it protects them pretty well.
“The judge is saying: ‘Let’s protect their interests until the end of November, and protect them completely.’ ”