Sears Canada said Tuesday it has "significant doubt" about its ability to stay in business and is exploring strategic alternatives, which include selling itself.
The department store chain, which has been operating at a loss since 2014, said it was recently expected to borrow up to $175 million secured against its owned and leased real estate.
But Sears Canada has only been able to secure borrowing of up to $109 million, after negotiating with lenders, the company said, warning it might not generate enough money from operations to meet obligations due over the next 12 months.
"That, and the lack of available alternative sources of liquidity ... which may not be available in a timely manner, mean there are material uncertainties as to the Company's ability to continue to satisfy its obligations and implement its business plan in the ordinary course," the company wrote in its first-quarter earnings release.
"Accordingly, such conditions raise significant doubt as to the company's ability to continue as a going concern."
Sears Canada said it has also decided to postpone its 2017 annual shareholders meeting, with a future date to be determined.
On Tuesday, Sears Canada also reported a 15.2 percent decline in first-quarter sales.
Sears Holdings, the owners of Kmart and Sears' U.S. stores, has about a 12 percent stake in Sears Canada. Sears Canada was spun off from Sears Holdings in 2013.
Sears raised a similar "going concern" flag earlier this year, citing the new disclosure was in line with regulatory standards and didn't reflect management's expectations for the company's near-term health.
However, Sears had said at the time that actions taken to boost liquidity during the year, including the sale of the Craftsman tool brand, could mitigate the going concern doubt. The retailer also revealed plans Tuesday to cut 400 jobs as it tries to trim its costs.
Sears Canada said Tuesday it has retained BMO Capital Markets, as a financial advisor, and Osler, Hoskin & Harcourt, as a legal advisor, to help in this process.