October 12, 2017
The Liquidation Agreement
On Friday, October 13, 2017, the Company will be bringing a motion before the CCAA Court for approval of an agreement it has entered into with a liquidation company to commence the process for the liquidation of all remaining Sears Canada store locations. The Company and the Monitor received three sets of proposals from potential liquidators and selected Gordon Brothers Canada ULC and Merchant Retail Solution ULC as the successful liquidation bidder. If the Liquidation Agreement is approved by the court on October 13, 2017, liquidation sales are expected to begin on October 19, 2017 and are to conclude by January 21, 2018. These dates may change upon agreement by the Company and the Liquidators, with approval of the Monitor and the DIP Lenders and other stakeholders. We were consulted in the negotiation of those agreements and contributed to discussions to improve the terms of the agreement to generate higher recoveries for Sears Canada in the liquidations sales.
The Going-Concern Bid
As part of the Sales Process conducted by Sears Canada while it is under CCAA protection, a going concern bid was put forward by a group led by Brandon Stranzl (the “Stranzl Group”) who is Sears Canada’s executive chairman, for the continuation of approximately 70 Sears Canada stores. Over the past week, our firm and the Court-appointed retiree Representatives, as well Employee Representative Counsel, became actively and directly involved in discussions and negotiations with the company, Stranzl Group, the Ontario government and the Monitor in order to assist in reaching an agreement that would result in a going-concern agreement. Unfortunately, to date, an agreement between Sears Canada and the Stranzl Group has not yet been achieved.
In the event a Going Concern can be achieved, the Liquidation Agreement provides the Company with the option of terminating the liquidation process at any time prior to 5:00pm EST on October 18, 2017 for the purpose of pursuing a going concern transaction. The Company’s Motion Record is available here.
Commuted Value Withdrawals
At this time, monthly pension benefits are continuing to be paid without reduction. Since the plan is only about 81 per cent funded on a wind-up basis as at December 31, 2015, there may be future reductions to your monthly pensions. However, this will depend on a number of factors, including the outcome of the insolvency proceedings. We anticipate that the Financial Services Commission of Ontario (FSCO) will appoint an administrator (an actuarial firm) to wind up the Pension Plan. As a reminder, those employees who wish to withdraw the commuted value of their pension benefit from the Plan will have the value reduced to reflect the 81 per cent transfer ratio.
We will continue to provide updates as information becomes available.