Daniel Schmerin: Turning to Sears Canada (NASDAQ:SRSC), is it inaccurate to think of Sears Canada as a mini version of Sears? What makes you think that Sears will not follow the same path as Sears Canada?
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Bruce Berkowitz (Trades, Portfolio): Well, Sears in the U.S. has been less aggressive on physical space updates. And Sears in the U.S. has much more liquidity, it is much more liquid with many more assets, more levers at its disposal. I don’t see any prospect of or need for a formal restructuring at Sears Holdings.
Daniel Schmerin: Sears owns 12% of Sears Canada. How will the company maximize the value of its stake in Canada given recent events?
Bruce Berkowitz (Trades, Portfolio): I’d hope the same way as Fairholme and other large shareholders.
Daniel Schmerin: What was motivating you to buy shares of Sears Canada during the last year? What was your estimate of the intrinsic value of Sears Canada before it filed for bankruptcy protection, and do you expect shares of the company to have value once it emerges from that process?
Bruce Berkowitz (Trades, Portfolio): Dan, I believe there is still ample asset value at Sears Canada as an ongoing entity. We estimated that the company had at least nine dollars per share of net asset value before restructuring charges. And if you adjust for the expected liabilities related to court proceedings, estimated NAV could be about seven dollars per share.
Right now, we are carefully examining the filings by Sears Canada and exploring all options. We want to make sure that the company is able to maximize the value of its assets for the benefit of all stakeholders, including us, the common shareholders. This process is expected to last for a few months. We’ll know soon enough.
Daniel Schmerin: Do you envision that Seritage Growth Properties will seek to acquire some of those Sears Canada properties? Or more Sears and Kmart properties in the U.S.?
Bruce Berkowitz (Trades, Portfolio): I don’t know, Dan. Seritage has many call options on Sears properties, and Sears has many put options on Sears properties. I don’t know how it’s going to exactly turn out.
From Bruce Berkowitz (Trades, Portfolio)'s June 29, 2017, public conference call commentary part I.
