September 12, 2019
Claims for amounts owing to Retirees
Representative Counsel prepared and advanced claims on behalf of the former employees and retirees for the following amounts owing to them by Sears Canada:
a) the amount of $260 million owing by Sears Canada to the underfunded Sears Canada Plan on its wind-up, which is referred to as the Pension Deficit Claim. This claim was also submitted by Morneau Shepell and it was agreed that only one claim would proceed in the CCAA claims process. We asserted a deemed trust priority for this claim. Following a mediation with Justice Morawetz, this claim was settled;
b) terminated OPEBs in the claim amount of approximately $421 million;
c) a claim for terminated supplemental pension plan benefits , which is under negotiation with the Monitor, and,
d) a claim for the terminated lifetime purchase discount in the amount of approximately $13.7 million;.
Based on the estimates provided by the Monitor based on the cash available in the estate of Sears Canada, distributions to unsecured creditors of Sears Canada Inc. will only be paid at approximately 6 to 8 cents on the dollar of their claim amounts. There are no remaining secured creditors of Sears Canada.
Employees and retirees of SLH Transport Inc., an affiliated company of Sears Canada, should receive approximately 15 to 20 cents on the dollar of their claim amounts based on the cash available in the estate of SLH Transport. Unsecured creditors of Corbeil Electrique Inc. should be paid their claim in full as the assets in the estate of Corbeil are sufficient to pay all Corbeil creditors’ claims in full.
CCAA Plan of Compromise and Creditors’ Meetings
On February 12, 2019, the Monitor brought a motion to the CCAA Court to file a proposed Plan of Compromise (the “CCAA Plan”). Generally, a “Plan of Compromise” in a CCAA proceeding is an agreement reached between the company and its creditors as to how the company will treat the payment of creditors’ claims, and typically involves partial payments with respect to those claims due to insufficient funds in the estate of the insolvent company. For this agreement to become binding on creditors and the company, it must pass a vote by a required majority of creditors held at a creditors meeting (the “Creditors’ Meeting”). If the Plan passes that vote, then it must be approved by the Court. If approved by the court, the Plan can then proceed to implementation after which distributions to creditors can commence.
Distributions to creditors, including retirees, on their accepted claims are expected to be paid by the Monitor in at least two instalments. The distribution will not occur until the CCAA Plan passes a vote of creditors and is approved by the Court.
A Creditors’ Meeting was initially scheduled for the end of March, 2019 however, certain issues arose with respect to conditions that need to be fulfilled in the proposed CCAA Plan that require additional time to resolve. The Monitor and major creditors, including Representative Counsel are continuing to work towards the resolution of certain pending matters before being able to bring the proposed CCAA Plan forward again and announcing a new date for the Creditors’ Meetings. We will post the date of the rescheduled Creditor’s Meeting and further information as soon as it has been set.
2013 Litigation regarding the $509 million dividend paid by Sears Canada
As previously reported, in December 2018, following extensive investigations into the affairs of Sears Canada, three lawsuits were commenced against various defendants including certain former directors of Sears Canada, ESL Investments Inc., Edward Lampert, and others (the “Dividend Litigation”). All of the lawsuits relate to the payment of the $509 million dividend by Sears Canada in 2013. These lawsuits are currently ongoing.
On April 10, 2019, the Monitor, the Litigation Trustee, the Pension Plan Administrator and the Representative Plaintiff (together the “Canadian Plaintiffs”) filed proofs of claim in the proceedings of Sears Holding Corporation (“SHC”) under Chapter 11 of the United States Bankruptcy Code with respect to the 2013 Dividend.
The current timetable for the litigation includes the following:
- Statements of Defence for the defendants other than Sears Holding Corporation to be served by May 10-July 29, 2019;
- Documentary production to be completed by June 30, 2019;
- Statement of Defence for Sears Holding Corporation – September 16, 2019;
- Discovery Period – November 22, 2019-December 16, 2019;
- Motions Regarding Refusals to be Delivered – February 3, 2020;
- Mediation – February and April 2020; and,
- Trial to commence May 19, 2020.
Any recovery obtained from the lawsuits would translate into increased distributions to Sears Canada’s creditors, including the retirees. Further information on this litigation can be found on the Monitor’s website at: http://cfcanada.fticonsulting.com/searscanada/Estate2013DividendLitigation.htm