Hudson’s Bay Company, Canada’s oldest retailer, is shuttering all stores and filing for creditor protection. An Ontario Superior Court judge has just shot down its proposed plan of restructuring. Confessing major monetary woes on March 7, Hudson’s Bay made the shocking announcement that it would stop making—at least temporarily—payments to landlords and suppliers. The company runs 80 Hudson’s Bay stores, as well as 13 Saks Off Fifth stores and 3 Saks Fifth Avenue. This week, it started liquidating everything except six locations, closing all other stores and restaurants in Canada except those located in the Greater Toronto and Greater Montreal Areas.
The court’s decision to reject the restructuring agreement marks a significant setback for Hudson’s Bay as it navigates creditor protection proceedings. If ratified, the deal would impose an April deadline to rescue the other stores. It would put even greater control of a creditor protection process into the hands of a company’s senior secured lenders, like Bank of America, Restore Capital and Pathlight Capital.
The lawyer for Hudson’s Bay had endorsed court approval of the agreement, but pointed out it was not the company’s ideal arrangement. The proposal further called for the establishment of a weekly operating budget for the company and ongoing reporting obligations to the lenders. In addition, any possible agreement with a prospective new owner would require approval from the lender or lenders. In spite of these terms, the company’s creditors — most notably its creditors and landlords (Ivanhoe Cambridge and Oxford Properties) — objected to the agreement.
“They aren’t incentivized to restructure. They are incentivized to liquidate,” – David Bish, a lawyer for Cadillac Fairview.
This rejection of the agreement raises concerns that creditors may seek receivership for Hudson’s Bay. This was a troubling prospect for Restore Capital, one of the company’s lenders.
“We don’t want to fight. We don’t want to bring a receivership application,” – Linc Rogers, a lawyer for Bay lender Restore Capital.
Restore Capital made clear that they were looking for a better solution and did not want to go down the path of litigation.
“We are looking at this court and saying there is a better path forward.” – Linc Rogers, a lawyer for Bay lender Restore Capital.
Hudson’s Bay’s present-day place underlines the thin line big chains walk between keeping the lights on and keeping creditors at bay. With its restructuring plan rejected, the company faces an uphill battle to stabilize its finances and secure a sustainable future.
