The Ontario Superior Court has deferred its decision on Hudson’s Bay’s proposal to liquidate all of its 96 stores immediately after failing to secure additional financing and asked the relevant parties to come back to court on Wednesday.
After a contentious court hearing on Monday, Justice Peter J. Osborne announced in an order that the court-appointed monitor requested he grant more time for stakeholders to discuss key issues raised during Monday’s hearing. In the meanwhile, Osborne is granting an extension of creditor protection to Hudson’s Bay pending further court instructions and an order to keep the documents of the company’s key employee retention plan private.
One of the key disputes from Monday’s hearing was the retailer’s request to continue to pause its rent payments to RioCan-Hudson’s Bay JV, a joint venture it has with RioCan Real Estate Investment Trust. Hudson’s Bay operates 12 retail stores in premises leased or subleased to it by RioCan-Hudson’s Bay JV and its subsidiaries.
The company said its cash flow forecast does not support the full amount of rent to RioCan-Hudson’s Bay JV but the latter insisted the rent to be paid as soon as possible. The Star learned from landlord lawyers that Hudson’s Bay has been paying its other landlords’ rent after it filed for creditor protection on March 7.
“Earlier this afternoon, the Court-appointed Monitor advised the Court that significant progress with respect to the resolution of various issues was being made and that discussions were continuing,” Osborne wrote in the order.
The company, founded in 1670, is proposing to liquidate its entire business — including 80 Bay stores, three Saks Fifth Avenue stores and 13 Saks Off 5th stores, and nearly half a billion dollars worth of inventory — if it is unable to secure additional financing. The process could last about 10 to 12 weeks, according to company lawyers on Monday.
More than 9,000 jobs will be eliminated across the country if the company shuts its doors. A lawyer who represents some Hudson’s Bay employees and retirees, spoke against the liquidation plan during the hearing, citing concerns over the potential mass termination.
The hearing of outstanding motions will resume at 2:00 p.m. on Wednesday at the Toronto courthouse. The court will address issues including the company’s rent owed to RioCan-Hudson’s Bay JV; its plan to liquidate its entire business, sell or reassign its leases with landlords, and launch a sales process to seek last-minute buyers and investors; and the company’s proposal to increase debtor-in-possession financing — a form of capital used for restructuring — from $16 million to $23 million.
“Given the speed with which events were occurring and matters were developing, numerous parties had not had time to fully digest the relevant events,” the court order read.
“I reserved my decision on the motions … and directed the principal stakeholders with the key objections to engage immediately in good faith discussions with the company and with the active facilitation of the Court-appointed Monitor, to see if the parties could resolve some of the issues at least on an interim basis,” Osborne wrote in the order.
The Hudson’s Bay Company, founded in 1670, was in dire financial straits when it filed March 7 for creditor protection under the Companies’ Creditors Arrangement Act in a bid to avoid bankruptcy. As of Jan. 1, the company had about $3 million in cash on hand, $1.13 billion in secured debt, and owed its nearly 1,900 unsecured creditors — such as brands, governments and landlords — about $520 million.
