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A Sears Canada store located at the Erin Mills Town Centre in Mississauga, Ont., is shown on June 22, 2017.Fred Lum/The Globe and Mail

Executives of insolvent Sears Canada Inc. plan to make a bid for some or all of the troubled retailer, according to court documents.

In all, more than 20 parties have signed non-disclosure agreements tied to a possible takeover of the Toronto-based Sears Canada, which got court protection from its creditors on June 22, the documents say. And Sears Canada's majority U.S. shareholders, ESL Partners LP, which is run by Edward Lampert – chief executive of U.S.-based Sears Holdings Corp. from which Sears Canada was spun off in 2012 – and Fairholme Capital Management LLC are also negotiating to sign non-disclosure agreements in the sale process.

The monitor in the Sears Canada insolvency disclosed in a report filed with Ontario Superior Court on Wednesday that Sears management involved in a planned bid will not have access to confidential information related to the bidding, including other would-be buyers.

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Even so, the prospect of Sears Canada top management bidding for remnants of the retailer under the insolvency process raises the spectre of it possibly vying against its U.S. majority shareholders in a possible auction.

Mr. Lampert's ESL and Fairholme said on Monday they are considering a potential deal with Sears Canada as the retailer looks to restructure itself under creditor protection. Under the court proceeding, Sears plans to let go 2,900 of its employees and close 59 of its 255 stores.

The retailer will be in court on Thursday to defend its intention not to pay severance to those laid-off staff as it scrambles to revive its flagging fortunes. And it will ask the court to allow it to stop contributing to its defined-benefit pension for current and retired staff, as well as no longer pay medical, dental and life-insurance benefits for retirees.

ESL and Fairholme, which together own about two-thirds of Sears Canada, said on Monday they were interested in evaluating, discussing and considering a potential negotiated transaction.

The monitor's report says it is "aware that a number of stakeholders are concerned as to the potential conflict of interest presented by the development and submission of a management bid."

The monitor said it is "cognizant of these concerns" and will work closely with Sears Canada's financial adviser, BMO Nesbitt Burns as well as a special committee of Sears Canada's board of directors and the retailer's management "to prevent such potential conflicts interfering with the proper conduct of the SISP [sale and investment solicitation process.]". Lawyers for suppliers and employees have raised concerns about the sale process, according to court documents.

The monitor's report says Sears Canada terminated a "significant" number of employees in the months leading up to its filing last month under the Companies' Creditors Arrangement Act (CCAA.)

"The monitor is cognizant of the fact that the CCAA proceedings have caused significant hardship to many of the former employees," the report says. It says the court-appointed monitor, the retailer and the employees' lawyers are talking about "possible mechanisms to assist the former employees" including a potential "employee hardship fund" and possible avenues to obtain early access to the Wage Earner Protection Program. The program protects up to $3,000 of workers' unpaid wage and vacation pay in a bankruptcy or receivership under the Bankruptcy and Insolvency Act. However, Sears Canada's proceedings are not under that legislation but rather under the CCAA.

Andrew Hatnay, a lawyer at Koskie Minsky LLP who represents former and current employees, said in an e-mail last week Sears retirees "have been raising the alarm about the financial collapse of Sears Canada with the company and the Ontario government for over five years.

"The company is now insolvent, the pension plan is underfunded and retirees are exposed to pension and benefit losses."

Mr. Hatnay said the CCAA filing and proposed sales process for its assets "appears to be a liquidation of what remains of Sears Canada. The process Sears Canada is following offers no protection for the retirees' pension losses, and Sears Canada now also seeks to cut off retiree health and life insurance benefits. This is a totally unacceptable situation … "

Sears Canada has announced it plans to close 59 locations and cut 2,900 jobs under a court-supervised restructuring. Here’s a look at the history of the retail giant.

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