Sears Canada Inc.

• 6/22/17 Recap: No one saw this dumpster fire coming. That's sarcasm, ya'll. Riddled with debt, a burdensome $267mm pension liability, a pattern of declining earnings (see below), and a 1950s sensibility that nobody is interested in, this penny stock ($SCRC) was bound to end up in bankruptcy court. Negative net cash flows have ranged from $30-$100mm per month for the past five months. Hence the "dumpster fire" comment: that's some serious cash burn. Yiiiikes. So, what, in addition to filing for bankruptcy, do you do when your company has sh*t the bed so badly that its brand equity is strongest as a punchline? You step up the marketing game by shunning the term "restructuring" and deploying the flashier descriptor "reinvention" instead. Or toss some pixie dust in the air and come up with "Sears 2.0". Because nobody will know the wiser. Anyway, Sears Holdings ($SHLD) notably holds 12% of SRSC so presumably that 12% is now worth 0% but we wouldn't put it past Eddie Lampert to pull a bunny out of a hat. Somehow. But what do we know: we've never even stepped foot in Ontario. Ps. SHLD traded up nearly 3% on the news. Pss. The Company intends to close at least 59 of 200 locations and layoff 2900 people - all pursuant to a $450mm cumulative DIP credit facility. 
• Jurisdiction: Ontario Superior Court of Justice
• Capital Structure: $300mm '19 senior secured debt (Wells Fargo)($170mm funded inc. LOCs), $94mm TL (funded)(GACP Finance Co. LLP, KKR Capital Markets LLC, TPG Specialty Lending Inc.); major shareholders (ESL Investments Inc., Fairholme Capital Management Inc.)    
• Company Professionals:
  • Monitor: FTI Consulting Canada Inc. (Greg Watson, Paul Bishop, Jim Robinson, Steven Bissell, Linda Kelly, Kamran)
  • Monitor Legal: Norton Rose Fulbright Canada LLP (Orestes Pasparakis, Virginie Gauthier, Alan Merskey, Evan Cobb, Alexander Schmitt, Catherine Ma)
  • Company Legal: Osler Hoskin & Harcourt LLP (Marc Wasserman, Jeremy Dacks, Michael De Lellis, Tracy Sandler, Shawn Irving, Martino Calvaruso, Karin Sachar)
  • Financial Advisor: BMO Nesbitt Burns Inc.
• Other Parties in Interest:
  • $300mm DIP ABL Agent: Wells Fargo Capital Finance Corporation Canada
    • Legal: Cassels Brock & Blackwell LLP (Ryan Jacobs, Jane Dietrich, R. Shayne Kukulowicz, Tim Pinos, Lara Jackson, Ben Goodis)
    • Financial Advisor: Alvarez & Marsal (Doughas McIntosh, Al Hutchens, Joshua Nevsky)
  • $150mm DIP Term Agent: GACP Finance Co. LLP
    • Legal: Goodmans LLP (Joe Latham, Jean Anderson, Dan Dedic, Graham Smith, Jason Wadden, Ryan Baulke)
  • Board of Directors
    • Legal: Bennett Jones LLP (Gary Solway, Raj Sahni, Sean Zweig)
  • Active Employees and Retirees
    • Legal: Koskie Minsky LLP (Andrew Hatnay, Mark Zigler)

Updated 7/11/17 6:11 pm