Shares in Sears Canada were halted Thursday morning after the retailer said it is seeking court protection from its creditors while it restructures.
The company has asked the Ontario Superior Court for protection under the Companies’ Creditors Arrangement Act — the law that covers insolvency proceedings.
The move allows the retailer a little more time to restructure itself, and if granted would block people and businesses that are owed money by the department store chain from moving in and seizing assets.
But the plan isn’t to close down entirely.
“If granted, the Sears Canada Group will work to complete its restructuring in a timely fashion and hopes to exit CCAA protection as soon as possible in 2017, better positioned to capitalize on the opportunities that exist in the Canadian retail marketplace,” Sears Canada said.
That means the retailer plans to continue to operate stores in Canada after restructuring itself. As of the end of April, Sears had 95 full-size department stores, 23 Sears Home stores and 10 outlet stores across Canada.
The company is also affiliated with 65 Sears Hometown stores, primarily in smaller towns and centres, but most of those are not owned by the parent company.
Trading in the shares was halted before the Toronto Stock Exchange opened on Thursday, pending news. Minutes later, Sears Canada announced its plan in a press release.
The stock has lost more than 80 per cent of its value on the TSX since the start of the year.
The company has seen a huge drop in its revenues compared to several years ago, waylaid by a changing retail landscape and tougher online competition. About a year and a half ago, the company revamped its operations and the early indications are that Sears has made progress since then, with same-store sales growth for two quarters in a row.
That’s an encouraging sign for the chain, but Thursday’s move signals that the company thinks more drastic changes are needed.
“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 outside of a CCAA proceeding,” Sears said.