Hudson’s Bay Company is clearly in over their head. It’s currently under creditor protection, fighting off landlords who want to tear up its lease contracts. The company filed for creditor protection in March due to increasing debt and has since pursued a plan to sell its leases, including 25 that Weihong Liu has purchased. Landowners from 23 of these leases have vehemently opposed the plan. This local business community opposition makes the future of the retail chain extremely uncertain.
Weihong Liu, a British Columbia entrepreneur, has a mission. She wants to make Hudson’s Bay stores a new chain of contemporary department stores under her name. Liu’s plans include three leases at B.C. malls she owns: Tsawwassen Mills, Mayfair Shopping Centre, and Woodgrove Centre. New landlord’s own words make it clear they refuse to sign off on current lease assignment plan. They’re against any future forced assignments too, no matter how well-meaning her intentions.
Under the Companies’ Creditors Arrangement Act, Hudson’s Bay can petition a court to assign its leases to Liu. To do this, they don’t need the landlord’s permission. This legal alternative allows the company to reset and chart a new course through liquidity crisis. It further provides the company time needed to focus on stabilizing its operations.
Liu’s new priority is getting 25 leases. At the same time, a second bidder is similarly seeking to win up to eight leases spread out across Ontario, Alberta, Saskatchewan and Manitoba. This recent turn of events is sure to make negotiations all the more tricky as Hudson’s Bay tries to regroup its assets and focus on minimizing its own liabilities.
Hudson’s Bay is also near to finalizing a different, larger deal. One of these leases has a mysterious landlord/benefactor who is willing to buy one of its leases for $250,000. If completed, this potential transaction would be the latest in a series of moves by Hudson’s Bay to rectify the company’s financial struggles through asset liquidation.
Liu has consented to pay $2 million against each of the leases that she plans to obtain. Hudson’s Bay then selected Liu as the preferred buyer for as many as 28 of its leases. These leases are in Alberta, British Columbia and Ontario, even including those associated with its sister brand, Saks. On Monday, the company plans to ask a court to approve its 28-lease settlement. If so, it would set the stage for a historic shift in its 27-year restructuring process.
The financial plight of Hudson’s Bay has changed in the interim. Alvarez & Marsal, the case’s court monitor, issued a periodic update. According to their reporting, Hudson’s Bay’s merchandise auction netted $349.3 million. A huge share of this revenue—$104 million—came from consigned goods. Sales via an art consultant agreement brought in $43.9 million. At the same time, a further $12.7 million was raised from furniture, fixtures and equipment.
Hudson’s Bay is preparing to formally make the case before a judge. The result will have notable repercussions not only for the company itself, but for the entire Canadian retail sector. The opposition from landlords could hinder Liu’s ambitions and delay any potential recovery for Hudson’s Bay.
