Canadian retailer prepares for bankruptcy

Sears Canada could file for Chapter 11 sooner than expected.



The struggling offshoot of Sears Holdings Corp., is preparing to seek court protection against its creditors. The filing — which could happen within weeks — will likely lead to a liquidation, with the business sold off in pieces, sources told Bloomberg.



Following the report, the company’s stock plunged as much as 30% in Toronto trading. Shares fell 25% to 60 cents on the Toronto Stock Exchange shortly after the open Wednesday, according to the Canadian Press.



Sources said the company’s most valuable asset is its real estate. However, with many locations operating in lower-end shopping centers, it could be difficult to sell them to a single buyer, Bloomberg reported.



The report is not a surprise. Last week, the retailer reported that it doesn't have enough cash flow over the next 12 months to meet its obligations. At that time, Sears Canada warned that it may have to restructure or be sold.



Similar to the complaints of struggling U.S.-based retailers, the Canadian chain blames an increasing shift to online shopping and experiences for its decline. It also feels increasing pressure from regional competitors, including Canadian Tire Corp. and Hudson’s Bay Co., the report stated.



The company also noted it has had recurring operating losses and negative cash flows from operating activities in the last five fiscal years. These net losses started in 2014.



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