New Brunswick

No public money given to Sears call centres: provincial government

New Brunswick taxpayers look like they will escape the Sears Canada bankruptcy without losing any money.

The Sears call centres didn't last long enough to qualify for any funding

Opportunities New Brunswick says no money has been paid to Sears for its two call centres announced in January. (Canadian Press file photo)

New Brunswick taxpayers look like they will escape the Sears Canada bankruptcy without losing any money.

Opportunities New Brunswick says not a cent of public money has been handed over to the company in any of the myriad subsidies announced in January.

The convoluted package of rebates, loans and grants from three different provincial government organizations totalled $8.7 million.

Thanks in part to how quickly Sears unravelled, the public won't lose a cent of it — because the Sears call centres didn't last long enough to qualify for, or claim, any of the funding.

The money was announced in January by Premier Brian Gallant. It was for two Sears call centres, one in Saint John that would employ 350 people and one in Edmundston that would employ 180.

Sears Canada was already facing financial problems at the time, and the company's position weakened throughout 2017. In June, it announced the closure of 59 stores, including those in Bathurst and Saint John, as part of a court-approved restructuring.

Opportunities New Brunswick chief financial officer Paul Fudge (left) pictured with chief executive officer Stephen Lund confirmed Sears did not qualify to receive any of the money for the call centres. (Jacques Poitras/CBC)
This week it applied for the court's permission to liquidate all its remaining stores, including those in Dieppe and Fredericton. The company said the call centres would close as well.

"There was never any money handed out to Sears, so there's nothing to be forgiven," said Opportunities New Brunswick's chief financial officer Paul Fudge.

"They haven't applied to get any money … so we've never paid any."

Documents no longer valid

Under ONB's standard funding agreement, when a company goes into court-ordered protection, "you're in default, and your loan documents are no longer valid," Fudge said.

That means ONB is not obligated to hand over any money in the future, he said.

The Sears package is complex because it involved four different funding programs from three different government organizations in two different cities.

But here's a guide to the money involved, including why none of it was handed over.

Of the $8.7 million, $4.3 million was ONB rebates and loans for the Saint John location, and $2.2 million was ONB rebates and loans for the Edmundston site. That's a total of $6.5 million from ONB.

Of that $6.5 million, $3.4 million was ONB payroll rebates. The agency pays out such rebates after auditing job numbers at the end of each calendar year. But because the Sears call centres didn't make it until the end of 2017, there was no payout.

The balance of the $6.5 million from ONB was a $2 million "forgivable loan" and a $1.1 million grant, both to help Sears with the capital costs of equipping the two call centres.

                                                                                                                                                                                               
Assistance TypeONBRDCPETLTotalPurpose
Forgiveable loan$2,000,000$2,000,000Capital
Non-repayable contribution$1,150,000$850,000$2,000,000Capital
Payroll rebate$3,356,800$3,356,800Employees
One Job Pledge$1.352,000$1,352,000Employees
Totals: $6,506,800$850,000$1,352,000$8,708,800

In the case of the loan, Sears had to secure the loan through a bank, Fudge said. Because it wasn't able to do that, the loan wasn't paid out.

"There was never any money handed out to Sears so there was nothing to be forgiven," Fudge said. "What they were supposed to do was sign the documents, meet all the terms and conditions, then apply to get the rebate, but none of that ever took place."

In the case of the grant, Sears never reached the point of asking for that money.

The remainder of the $8.7 million overall package, $2.2 million, would have come from two other government departments.

Job funding nixed 

The Department of Post-Secondary Education, Training and Labour was going to fund 65 of the Sears jobs through the One-Job Pledge. Those jobs would not be eligible for the ONB payroll rebates.

But in that case as well, Sears Canada ran out of time before it could get the money.

The department had planned to hand over $894,000 for the Saint John centre under the One-Job Pledge and $458,000 for Edmundston.

But that funding has several conditions attached to it, including that a job must last at least 30 weeks to be eligible for funding.

As a result, none of that funding was paid out either. "We did not even receive a request for money," said departmental spokesperson Stephanie Bilodeau.

The last slice of funding was $850,000 from the Regional Development Corporation under the Northern New Brunswick Economic Development and Innovation Fund. That money was destined only for Edmundston.

Sears Canada announced Tuesday it was seeking court approval to liquidate all of its remaining stores and assets. (CBC)
In that case, ONB would have paid out the money to Sears and recouped it from RDC.

But that funding commitment also evaporated when Sears sought court protection from creditors, Fudge said.

RDC spokesperson Bruce MacFarlane said ONB has not come looking for the $850,000 to pass on to Sears. "We have not received a claim to date," he said.

Part of the confusion over whether the province had handed over money goes back to comments in February by Francine Landry, the minister responsible for Opportunities New Brunswick.

Landry told a legislature committee that $4 million of the money was "up front" funding.

But that did not mean the money was paid out, Fudge said.

"We call it up-front money because it covers up-front costs to get the facility up and running. But they still have to do the work, make the payments, prove to us that they paid, and then apply on a claims basis to get reimbursed."

That never happened, Fudge said.

The New Brunswick government was listed as a creditor in Sears Canada bankruptcy filings earlier this year, but Fudge said that reflected money the company expected to receive before it sought court protection from its debts.

The next filing will probably not include New Brunswick now that the province is free of any obligation to pay, he said.

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