Creditors large and small caught by failure of Sears

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Marc Brunet, owner of Cozy Canuck Heating & Cooling, is among hundreds of claimants left holding the bag in the Sears Canada bankruptcy.

After the liquidation he'll see just a fraction of the $15,709 he's owed. Worse yet, as a contractor who installs and maintains heating and air conditioning units purchased by Sears customers in the Ottawa area, he stands to lose 80 per cent of his business in one fell swoop.

Mr. Brunet, who was once a Sears employee, will have to work the phones now, dealing directly with the insolvent retailer's former customers as he tries to keep his three technicians working.

"I won't close the company, but it's going to be extremely hard," Mr. Brunet said. "Customers are reaching back to me – they need to service their appliances – so I think I'll be okay. But it's going to be hard for now."

On Friday, an Ontario judge approved the company's plan to liquidate Sears Canada, and the company will start liquidation sales on Thursday before shuttering 131 stores and erasing 12,000 jobs. It spells the unceremonious end to a one-time retail titan that had operated since Louis St. Laurent was prime minister.

Now there's the little matter of just who gets what after everything is sold to bargain-hunting consumers and businesses.

Shareholders, including the largest, Edward Lampert, who is chief executive officer of Chicago-based Sears Holdings Inc., have had their investments wiped out in the bankruptcy process (though Mr. Lampert did profit handsomely from dividends following a string of Sears Canada asset sales).

The Sears Canada lenders, Wells Fargo and Great American Capital Partners, will recoup their debtor-in-possession financing of $450-million, as well as the money the firms previously lent the chain.

What's left over after sales of the remaining Sears Canada assets and inventory – some number of pennies on the dollar – will be divvied up among a strikingly diverse list of suppliers, service providers and landlords on the list of unsecured creditors.

As expected, some of the world's top brands, such as Samsung, LG Electronics, Electrolux, Whirlpool and Clinique Laboratories, are owed millions. Numerous suppliers of apparel, housewares, sporting goods, tools – you name it – from China, Taiwan, Bangladesh, South Korea and the United States are on the list for various amounts of receivables.

City governments, utilities and wireless networks are out amounts that have yet to be determined.

Then there are dozens of small businesses across the country such as Cozy Canuck, which install and repair appliances, fix watches and jewellery as well as provide janitorial services at the stores.

There's even a Girl Guide troop in North Bay, Ont., out of pocket to the tune of $2,635.

Some suppliers had watched Sears Canada's struggles play out in real time and reduced their reliance on it. Such is the case with Satpanth Capital Inc., which sells King Koil mattresses and other furniture brands. It is owed $254,305, according to court documents.

Sears now accounts for less than 1 per cent of the company's business, down from 15 per cent to 20 per cent before it sought protection from creditors, said Alykhan Sunderji, vice-president at Satpanth in Calgary.

He would have preferred Sears Canada to continue as a going concern over liquidation, even if it meant a lower immediate recovery of the money that was owed. That would have preserved jobs and meant a smaller hit to the economy.

"But people love a funeral more than they love a wedding. That's the reality of it," Mr. Sunderji said.

"With going-out-of-business sales, they do generate a lot of money. Of course, the banks love that, because they can get to take their cut."

It will not be just the Sears Canada employees suffering job loss, but suppliers will also be forced to make cuts as a result of the loss of business down through the supply chains.

At press time, it was not clear if the North Bay Girl Guides were out of their money due to a cookie promotion, but it is a blow, said Sarah Kiriliuk, senior manager of marketing and communications for Girl Guides of Canada.

"That's quite a bit of money for a unit in North Bay and we're looking into it and trying to sort that out," she said. "It would be great if we could get that back, but understandably there are other creditors and the attention will be on them instead."