Fairholme Funds Inc. said in a regulatory filing on Thursday — a Schedule 13D with the Securities and Exchange Commission — that it and ESL Partners are no longer considering a joint bid to take Sears Canada out of bankruptcy.
The filing said other financing transactions might still be considered, as well as the possibility of a sale of Sears Canada shares held by Fairholme to generate a tax loss for the fund and its investors. Fairholme holds a 20.7 percent stake in Sears Canada.
ESL, which holds a 45.3 percent stake in the Canadian retailer, said it would consider similar options. ESL is headed by Edward S. Lampert, who is also chairman and chief executive officer of Sears Holdings Corp. in the U.S.
Sears Canada was partially spun off from Sears Holdings Corp. in 2012, with Sears still retaining an 11.7 percent stake.
Sears Canada last month applied for protection through Canada’s Companies Creditors Arrangement Act in the Ontario Superior Court of Justice, a commercial court in Canada. There was speculation in the weeks prior to the application that the entity would seek protection from creditors. Sears Canada subsequently made the request to the court after talks with creditors failed and it couldn’t find a buyer. While some anticipate that a liquidation might be an option, there is still the possibility until Aug. 31 that others might want to bid for Sears or parts of the retail chain.
Sears Canada posted a first-quarter loss of 144.4 Canadian dollars on a revenue decline of 15.2 percent to 505.5 million Canadian dollars.
Since the separation of the two businesses, Lampert has been focused on trying to turn around the U.S. retail business by moving the operation to a membership-centric model called “Shop Your Way.” The model is primarily online-focused, although it does provide convenience options such as ordering online and picking up in stores.