Sears Canada files for bankruptcy, asks for permission to suspend pension payments.
Sears Canada Inc said on Thursday it obtained court protection against creditors to proceed with a restructuring that will include store closures and layoffs as it seeks to recover from years of declining sales.
The retailer also plans to file a motion with a Canadian court to request permission to suspend certain monthly payments to its pension plan because it is running low on cash, according to a court filing.
The Canadian company, which was spun off from U.S. department-store pioneer Sears Holdings Corp in 2012, said it planned to close 59 of its 225 stores and cut 2,900 of its approximately 17,000 workers.
Existing lenders have agreed to provide up to C$450 million ($340 million) in interim financing to help the company, controlled by billionaire hedge fund investor Eddie Lampert, and reinvent itself as an apparel company selling discounted designer labels and low-priced clothing.
It will abandon areas long associated with the Sears brand, such as home appliances, tools, electronics and auto parts sold at its Sears department stores, home stores, discount outlets and Corbeil appliance and electronics chain.
The news was not unexpected as Sears Canada, much like Sears Holdings, its fourth-largest shareholder, has struggled for years to regain business from shoppers who prefer stores that keep up with fast-changing fashion trends.
The company flagged doubts about its ability to continue as a going concern last week and said it was exploring strategic options, including selling itself..
“The continued liquidity pressures facing the company, as well as legacy components of its business, are preventing it from making further progress and from restructuring its legacy assets and businesses,” the company said in a statement.
It named Bank of Montreal as its financial adviser and the law firm Osler, Hoskin & Harcourt LLP as its legal adviser. It said FTI Consulting would serve as restructuring consultant.
Regarding its pension payments, the retailer has indicated in wants to stop payments to a post-retirement benefit plan providing retirees with life insurance and medical and dental benefits, according to a court filing. Sears Canada is current on the payments for the pension and post-retirement benefit plan now.
The company also said in the filing that all 32 of the Corbeil appliance stores are expected to remain operational during the insolvency. Corbeil has a separate management structure from the rest of Sears Canada, according to the filing.
courtesy of Thomson Reuters 2017