November 6, 2020
On October 27, 2020, on a motion brought by the Monitor, the Ontario Superior Court of Justice (Commercial List) granted an order (the “Meetings Order“) in which it accepted the filing of the draft CCAA Plan of Compromise (“CCAA Plan“) for Sears Canada and authorized the Monitor to hold creditors meetings to approve the CCAA Plan.
The CCAA Plan was proposed by Sears Canada to reflect the settlements of the major claims against the Sears Canada estate, including the settlements in the dividend litigation as previously reported, and to deal with the distribution of the assets of Sears Canada to its creditors. Generally, a “CCAA Plan” is a global agreement reached between the company and its creditors as to how the company will treat the payment of creditors’ claims, and typically involves a partial payment of creditors’ claims.
All creditors of Sears Canada are facing significant shortfalls in the payment of their claims, as there are insufficient assets in the Sears Canada estate to cover all of the claims against it. Based on estimates provided by the Monitor, at this time, we expect that distributions to unsecured creditors of Sears Canada will be paid at approximately 8 cents to 10 cents on the dollar of their claim amounts.
The creditors meetings have been scheduled for November 16, 2020, at 10:00 a.m. for the SLH Transport Inc. creditor class and November 16, 2020 at 11:00 a.m. for the Sears Canada creditor class. You do not need to attend.
Pursuant to the Meetings Order, we were authorized by the Court to vote on behalf of the Sears Canada retirees that are subject to our Representation Order. Accordingly, the retirees who have not opted out of our representation do not need to submit a proxy form or attend the creditors meetings. The administrator of the Sears Canada Pension Plan, Morneau Shepell Ltd. (“Morneau”), will be voting with respect to the pension wind up deficit claims arising from the underfunding of the Plan.
Following our consultations with the Court-Appointed Representatives and since the CCAA Plan reflects the provisions of the settlements we reached in the Pension Support Agreement, the settlements we reached with respect to the retirees’ other post-employment benefits claims, the supplemental pension plan claim, and the purchase discount claim, as well as the settlements with the defendants to the dividend litigation, we will be voting in favour of the CCAA Plan. Morneau has advised that it will also be voting for approval of the Plan.
If the CCAA Plan is approved at the creditors meetings, it must then be approved by the Court as being fair and reasonable in order to become effective. The Monitor’s motion for a Sanction Order is currently scheduled for November 23, 2020. We will continue to provide updates here as this matter progresses.