Representative counsel for Sears Canada Inc.’s retirees has sent a letter to the monitor, FTI Consulting Inc., and all parties involved in the Companies’ Creditors Arrangement Act proceedings asserting their first priority claim against the company’s estate on behalf of pension members.

In the letter sent recently, Andrew Hatnay, a partner at Koskie Minsky LLP, wrote that his clients are the beneficiaries of statutory deemed trusts for the amounts owing by Sears Canada to the pension plan, including unpaid special payments and the windup deficit.

“As such, they are entitled to first priority recovery for those amounts ahead of the claims of all other creditors immediately after the CCAA-court ordered changes.”

Read: Sears liquidation a vindication for pensioners’ move to force DB windup

Sears Canada applied for and received creditor protection under the act in June. In August, lawyers for the employees and retirees asked the court to order a windup of the pension plan. The Ontario superintendent of financial services has since appointed Morneau Shepell Ltd. to take over the administration of the plan, noting that a windup is inevitable.

In the letter, Hatnay wrote that the pension plan has a funding shortfall of about $270 million. “If the plan is wound up in its current underfunded state, it will result in reductions to the monthly pension benefits of retirees. Such reductions will cause financial hardship for many Sears retirees across Canada . . . who have already lost their earned health and life insurance benefits.”

Read: Sears Canada agrees to continue special payments to DB plan, retiree benefits

Copyright © 2020 Transcontinental Media G.P. Originally published on benefitscanada.com

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