Eddie Lampert's ESL Partners and sometimes activist Fairholme Capital Management's Bruce Berkowitz on Monday, July 10, reported that they are considering a "potentially negotiated transaction" with embattled retailer Sears Canada Inc., which filed for protection from creditors in Ontario last month. 

According to a release, ESL Partners owns a 45.3% equity stake in Sears Canada. Fairholme's activist 13D filing with the U.S. Securities and Exchange Commission reported that it owns 20.7% of the company's equity, acquiring a significant stake in May. 

And while it is unclear what kind of transaction the two funds are considering it is likely they would like to buy the retailer or its assets through the restructuring process. In an announcement, ESL and Lampert said they could engage in "financing transactions, purchase and sale transactions or restructuring transactions." The two funds said that there was no assurance that a transaction will be pursued or closed.

The ESL-Fairholme release comes after Sears Canada said June 22 that it filed for protection from creditors in Ontario after it said June 13 that it doubted its ability to continue operations as a going concern.

Under Canada's Companies' Creditor Arrangement Act or CCAA, Toronto-based Sears Canada said it is aiming to restructure its business and exit its insolvency case, filed in the Ontario Superior Court of Justice, by the end of this year.

ESL and Fairholme said they are in discussions about the potential transaction in connection with Sears Canada's CCAA proceedings, adding that they have engaged Canadian legal counsel to represent them.

The company is set to return to Ontario Superior Court of Justice for a follow-up hearing on Thursday, to gain approval to begin a sales and investment solicitation process.

As of April 29, Sears Canada operated 160 stores. Sears Canada issued a notice recently that announced it would be eliminating 2,900 jobs and closing 59 stores as part of its restructuring process.

Sears Canada operates as a separate entity from Sears Holdings Corp. (SHLD) , but the U.S. company and its CEO and chairman Edward S. Lampert own 11.7% and 45.3% of the bankrupt retailer's common shares, respectively.

Sears Canada trades on the Toronto Stock Exchange under the symbol (SCC) - Get Report  but is expected to be delisted on July 28. The common shares used to trade on NASDAQ under SRSC, but trading was suspended on July 3, 2017.

 Lindsay Rittenhouse contributed to this report