Sears Canada to close 59 stores, cut 2,900 jobs
MARINA STRAUSS and JOYITA SENGUPTA, The Globe and Mail
Published Thursday, Jun. 22, 2017 8:35AM EDT
Last updated Thursday, Jun. 22, 2017 11:23AM EDT
Ailing Sears Canada Inc. on Thursday got court protection from its creditors so it can close 59 stores – including 20 large department stores – and let go about 2,900 of its 17,000 employees to continue operating and possibly sell the business.
Toronto-based Sears said it is closing 20 of its 94 department stores, plus 15 of its home stores, 10 outlet stores and 14 Hometown locations.
Insolvent Sears Canada Group operates 225 stores in all under the Sears and Corbeil banners. It got protection from Ontario Superior Court under the Companies’ Creditors and Arrangement Act.
Sears has not finalized the specific timing of the store closings; its other outlets will remain open, it said in a statement.
Sears said it wants to continue its reinvention plan which entails introducing discounted designer fashions and a new private label line at affordable prices to draw more customers to the stores, as well as beefing up its digital and e-commerce operations.
Sears lawyers asked the court to shield it from creditors so it could “continue operating as a going concern as it pursues restructuring options including reorganization and a potential sale of the business in order to maximize enterprise value,” documents filed with the court say.
The initial CCAA court order is in effect for 30 days, subject to extension by the court which is usually what happens in these types of major insolvencies.
Sears’s executives “need to complete their operational restructuring in a stable environment that will allow them to preserve the going-concern value of their business and deal with the claims that will arise from the last phase of their restructuring,” court documents say.
The various Sears divisions “are facing a looming liquidity crisis and will be unable to meet their obligations as they become due without court protection.”
Sears lawyers met with a court judge in his chambers – rather than in open court – at 8:30 am in Toronto, a court official said.
“It is necessary and in the best interests of the Sears Canada Group and their stakeholders that the Sears Canada Group be afforded the ‘breathing space’ provided the CCAA [insolvency law] as they attempt to restructure their business.”
Sears Canada has secured up to about $450-million of crucial debtor-in-possession financing from its two existing lenders in two interim financing facilities, court documents say.
“The lenders providing the DIP facility will only extend credit to Sears Canada if it is a borrower under the DIP facility and obtains an initial order of this Honourable Court under the CCAA providing for a super-priority charge on all of the assets and property of the applicants [Sears] …. Without the DIP facility, the Sears Canada Group will be forced to shut down its operations, with a significant loss of employment.”
Sears had scrambled this week to secure the debtor-in-possession financing, which was crucial to getting the CCAA court nod.
Sears also has developed a “key employment retention plan” (KERP) to “encourage the continued participation of senior management and other key employees of the Sears Canada Group in the business and the restructuring,” documents say. The plan provides “appropriate incentives” for Sears’s critical staff “to remain their current positions and ensures that they are properly compensated for the assistance in the restructuring process.”
Despite its poor results over the past years, Sears has managed to increase its same-store sales in each of its last two quarters under the new strategy, the company said. “Sears Canada believes this indicates that the new brand positioning is starting to resonate with consumers,” the company said.
The court appointed as monitor FTI Consulting Canada Inc. in the Sears case to oversee the restructuring.
The initial CCAA court order does not apply to Sears Canada ‘s pension assets that have previously been contributed in to the pension plan, the company said. Those funds are held separately from the assets of the Sears Canada Group, it said.
Sears Canada has hired BMO Nesbitt Burns as its financial adviser and Osler, Hoskin & Harcourt LLP for legal counsel. The board of directors has retained Bennett Jones LLP as its law firm.
Stores slated to be closed are:
Sears Full-Line: Medicine Hat, AB ; Grande Prairie, AB ; Lloydminster, AB ; Red Deer Relocation, AB ;Kamloops Aberdeen Mall, BC ;Bathurst, NB ;Saint John, NB ;Corner Brook, NL ;Truro Mall, NS ;Dartmouth, NS ;Brockville, ON ;Sault Ste. Marie, ON ;Hull, QC ;Chicoutimi, QC ;St. Georges de Beauce, QC ; Alma, QC ;Drummondville, QC ;Regina, SK ;Moose Jaw, SK;Prince Albert, SK
Hometown: Cold Lake, AB ;St. Albert, AB ;Okotoks, AB ;Spruce Grove, AB ;Ft. McMurray, AB ;Leduc, AB ;Sherwood Park, AB ;Creston, BC ;Sechelt, BC ;Grand Forks, BC ;Orangeville, ON ;Rimouski, QC ;Rouyn-Noranda, QC ;Melville, SK
Outlet: Abbotsford Retail, BC ;Winnipeg Garden City, MB ;Halifax Outlet, NS ;Cornwall, ON ;Chatham, ON ;Cambridge, ON ;Timmins, ON ;St. Eustache, QC ;Montreal Place Vertu, QC ;Sorel, QC
Sears Home: Calgary, AB ;Edmonton Skyview, AB ;Ancaster, ON ;Woodbridge, ON ;London, ON ;Scarborough, ON ;Kingston, ON ;Ottawa East, ON ;Sudbury, ON ;Windsor, ON ;Orillia, ON ;St. Bruno, QC ;Laval, QC ;Quebec City, QC ;Ste. Foy, QC
https://www.theglobeandmail.com/report-o...for-creditor-protection/article35418399/
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