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Report: Sears Canada to Seek Creditor Protection

Sears Canada might be the first shoe to drop for Sears Holdings.

Liquidation may be on the horizon for Sears Canada, an unnamed source close to the matter has told Reuters.

The company is likely to seek court protection against its creditors soon, which could result a sell off of pieces of the company, the source said. The market’s reaction was swift. Sears Canada share prices dropped by 30 percent immediately following the news.

Sears Canada operates 155 stores, including full-line stores and outlets, and the owned locations represent the company’s most valuable asset, though much of it is located in lower-end shopping centers.

Sears Canada first raised questions about its ability to continue as a going concern last week. At the time, it said it was exploring alternatives including a financial restructuring or a sale of the company.

(Read more about Sears Canada’s current straits: Financial Roundup: J.Crew Restructures Debt Amid Losses, Neimans Shuts Down Takeover Talks, and Sears Canada Teeters)

Bloomberg reports that Sears’ chairman and CEO Edward Lampert is the largest shareholder of Sears Canada at approximately 45 percent, while Sears Holdings, which spun the Canadian business off in 2012 holds 12 percent.

Like its U.S. counterpart, the retailer is bleeding cash. The publication reports that Sears Canada has lost more than $700 million Canadian ($528 million) in the past three years. The company launched a turnaround plan in 2016 that focused on product innovation, customer experience and brand positioning. And though the company says the changes are starting to resonate with consumers, it seems time is running out.