UPDATE: Sears Canada reportedly has 'little time' to mull bid

Dive Brief:

UPDATE: A special committee of Sears Canada’s board will decide this week on a bid to keep some of the retailer’s stores afloat as a going concern, according to The Wall Street Journal. The "last-ditch" bid comes as lenders press in bankruptcy to liquidate the assets of the Canadian department store retailer.
Sears Canada’s top executive, Brandon Stranzl, has been lashing together an offer for the company with backing from private equity investors. Stranzl told the Journal that the latest bit has the full backing of those investors and is "not conditional."
Unnamed sources told the newspaper that Sears Canada has "has little time to make its decision because of an impending cash crunch." According to Reuters, the retailer won court approval Wednesday to extend its credit protection until Nov. 7. At the same time, Sears Canada’s creditors set a deadline of this week to liquidate the retailer’s assets, leaving until Oct. 7 to decide on a buyout deal. Asset liquidation sales could begin as early as Oct. 19, Reuters reports.

Dive Insight:

Stranzl’s Hail Mary to save Sears Canada from liquidation could be the retailer’s final chance.

The Journal reported earlier Wednesday that Stranzl, who departed to prepare a bid, "has been racing to piece together his proposal in the face of competing offers by landlords and liquidators for the company’s assets," but that the company, in creditor protection, is "under pressure from its lenders to close deals and raise cash to repay its bankruptcy financing."

According to the Journal, Sears Canada’s bankruptcy monitor, FTI Consulting, was seeking court approval Wednesday to dispose of 11 stores through lease exits or sales that "undercut"a potential private equity-backed bid for the Canadian department store retailer, the Journal reports. According to the newspaper, a lawyer for FTI told the court Wednesday: "We are near the end of the road. We have pushed the time limits."

In August, reports surfaced that Stranzl was preparing a bid for the company, which filed for creditor protection in Canada during the summer. Later, media reported that Stranzl was negotiating with potential private equity partners on the bid, worth more than $500 million, for Sears Canada.

Stranzl’s hoped-for deal holds the potential of keeping afloat a pared-down version of Sears Canada. Bankruptcy proceedings and Stranzl’s dealings has added drama to the retailer’s story. So have reports of employees fuming this summer as managers took large bonuses while the retailer’s pension payouts became uncertain and employees lost jobs through the restructuring process.

In July, ESL Partners — the hedge fund run by Sears Holdings CEO Eddie Lampert — and Fairholme Capital Management were also said to beinterested in propping up the company in some way, but those talks fell through, according to the Journal. ESL and Lampert own about 45% of Sears Canada while Sears Holdings, which spun off Sears Canada in 2014, owns another nearly 12%. Fairholme owns 20.8% of the Canadian retailer.

After five years of operating losses and negative cash flow, Sears Canada said in a June 13 release that "cash and forecasted cash flows from operations are not expected to be sufficient to meet obligations coming due over the next 12 months." It filed for creditor protection later in June with immediate plans to close 60 stores.While Sears Canada today operates separately from its former parent, it is still tightly connected to Lampert, ESL and Sears' through their respective stakes.