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Private Equity Could Rescue Sears Canada From Liquidation

Sears Canada could survive bankruptcy—but with only a fraction of its locations intact.

Former Sears Canada executive chairman Brandon Stranzl, who stepped down from his position last month to pursue a deal for the retail chain, has reportedly garnered interest from a private equity firm for a buyout.

Referencing unnamed sources, The Wall Street Journal reports Stranzl has put together a deal worth 650 million Canadian dollars ($533 million) that would rescue the company from full liquidation. Stranzl would fund the deal through private equity backing by Vadim Perelman and debt financing.

However, the offer wouldn’t be enough to rescue the whole chain, which filed for Canada’s version of bankruptcy protection in June. Stranzl’s new Sears Canada would only include about 70 stores, down from more than 200, the insiders revealed. Stranzl’s bid would only be accepted if the courts determine the locations are more valuable in operation than in liquidation.

Liquidation of the chain has already begun, with 54 locations slated to close.

If the deal progresses, the new entity will need to rehabilitate the store’s reputation, as it’s been under scrutiny by the press, former employees and consumers for how it’s handled the pension and benefits for those who have been let go.

Sears Canada announced today that due to its restructuring, it will not be releasing financials for the second quarter, ended July 29. Not doing so, it said, will likely trigger a cease trade order with respect to the company’s securities.

Edward Lampert, CEO of Sears Holdings, which spun off Sears Canada, had considered his own bid for the retailer through his company ESL Partners in collaboration with Fairholme Capital. The two firms, which own about two-thirds of the shares for the business, ultimately dropped the idea at the end of July.

Prior to the bankruptcy filing, Sears Canada had been in the midst of a turnaround, which included a new off-price model and a revamped private label assortment.