Bankrupt Sears Canada Asks Court For Permission To Liquidate, Shut Down

Image courtesy of Jim and Tiffany Kelly

Like its American cousin, Sears Canada is in financial trouble. Unlike Sears Holdings, it doesn’t have a vast real estate portfolio that it can sell to raise cash. To that end, the company announced today that there is no way to keep the business going, and it will close all stores and liquidate.

Tears for Sears, eh?

Since June, Sears Canada has been under the protection of the Companies’ Creditors Arrangement Act, or CCAA, a process similar to Chapter 11 bankruptcy in the U.S. The company’s leaders intended to sell the chain or find investors, which the court approved, but no buyers or investors were able to reach a deal.

Possible suitors included ESL Investments, the hedge fund run by Sears Holdings chairman and CEO Eddie Lampert, who owns nearly half of Sears Canada’s stock, and Fairholme Capital. The last potential transaction that would have saved stores and jobs was a bid by the company’s own executive chairman, Brandon Stranzl, but that also fell through.

“[F]ollowing exhaustive efforts, no viable transaction for the Company to continue as a going concern was received,” the company said in a statement, though there were buyers interested in purchasing unspecified parts of the Sears business.

The company has asked the court for permission to begin liquidation sales, which would start on or after Oct. 19 and last for 10 to 14 weeks. Around 12,000 Sears Canada employees will lose their jobs, and the company ended severance pay when it entered creditor protection.

Why is Sears Canada separate?

Sears Canada began in the early ’50s as a joint venture between the Canadian department store chain Simpsons and American catalog and department store retailer Sears Roebuck. In 1978, the Hudson’s Bay Company acquired Simpsons, and Sears took over the entire Canadian venture. Sears owned 51% of the company until 2014, with the rest owned by stockholders, and successor company Sears Holdings sold most of that stake to raise cash in 2014.

As of the beginning of 2017, Sears Holdings, the parent company of Kmart and Sears in the U.S., owned 11.7% of Sears Canada. Sears Holdings chairman, CEO, and chief manifesto-writer Edward S. Lampert owned 45.3% of the company’s shares himself or through investment funds that he controls.