July 23, 2020
On March 16, 2020 the Superior Court of Justice (Commercial List) approved an settlement reached with Sears Holding Corporation with respect to the 2013 Dividend Litigation. Based on the settlement, the plaintiffs will have a allowed Class 4 general unsecured claim in an amount equal to $200 million CAD once it is approved by the United States Bankruptcy Court.
As previously reported, we advanced a priority claim for the amount of the pension wind up deficit ($260 million) based on the deemed trust provisions in the Ontario Pension Benefits Act and the decision of the Supreme Court of Canada in the Indalex case. Our priority claim was opposed by the CCAA Monitor and a judicial mediation was scheduled before now Chief Justice Morawetz of the Ontario Superior Court in October 2018.
A favourable settlement was reached at the mediation with the Monitor agreeing to treat the pension deficit claim at 2 ½ times the actual deficit amount of $260 million (i.e. $650 million) for distribution purposes from the estate of Sears Canada. Distributions are payments that will be made to all creditors in the future. The settlement means that the pension fund will recover as if it is a claim of $650 million instead of the deficit amount of $260 million and thereby recover a greater amount from the estate which in turn will be used toward the payment of retirees’ pension benefits.
The final amount of the distribution is not yet known but we expect to have more financial information about the amount available for distribution to creditors of Sears Canada in the fall.
The 2013 Dividend Litigation against the remaining defendant directors and officers was scheduled to commence on May 19, 2020, however, due to the current COVID-19 crisis has been adjourned to a date to be fixed after June 1, 2020. We will provide an update as soon as a date is scheduled or more information is available.