On June 22nd, 2017, Sears Canada filed for bankruptcy. First, we should ask: How is this different and similar from filing bankruptcy in the United States? An oversight committee will be assigned to keep an eye on the financial day to day operations of the company without having direct control. The Sears Canada bankruptcy was filed under what is called Companies’ Creditors Arrangement Act. It is different from Chapter 11 bankruptcy in a few major areas. The oversight authority will have supervision over the sale of assets and will be responsible for declaring if Sears Canada should refile under the Bankruptcy and Insolvency Act. This would mean a total liquidation.
The Sears Canada Bankruptcy
After other bankruptcy filings in the US, many individuals aren’t surprised to hear the news of Sears Canada Bankruptcy filing. Sears and Kmart have closed over 200 stores, J.C. Penny 138 stores, and countless other retail companies have shed a number of stores in 2017. BankrtupcyData.com has reported more than 300 retailers have filed for bankruptcy in 2017 alone. Chapter 11 Bankruptcy is the main form of debt relief for companies. It allows them to restructure their debt while continuing to operate. The store closings are an effort to significantly lower operating costs across the board so that the brand can stay alive.
The recent bankruptcy declaration begs a number of questions. How can such a large and seemingly successful department store have so much trouble? Changes in fashion trends and the rise of Amazon.com may hold the answers. E-commerce giants are making it more difficult for mall based brands to compete. While Sears most likely will survive the shedding of jobs and stores, it remains unseen as how retail stores will find their niche in digital world where almost anything can be bought online and shipped directly to your home.
Sears Canada will continue to be monitored by the Superintendent of Bankruptcy in Canada to assess its financial health. If you’re interested in the details, you can find information from Sears Canada’s Pre-filing report.
For more information: https://cfcanada.fticonsulting.com/searscanada/docs/Pre-Filing%20Report%20of%20the%20Proposed%20Monitor%20-%2022Jun20….pdf