An Ontario court has granted Hudson’s Bay an extension of its creditor protection and given the beleaguered retailer permission to repay millions of dollars owed to certain senior lenders that have priority over other creditors — including the company’s employees.
The approval came after a lawyer representing Hudson’s Bay addressed the court Tuesday morning in response to concerns raised by some stakeholders about a previous deal in which the company purchased Neiman Marcus. That deal resulted in Hudson’s Bay being separated into a standalone business just three months before it filed for creditor protection in early March.
Hudson’s Bay expects to complete liquidation sales at more than 80 stores nationwide by the end of this month. It currently holds about $193 million in cash, including more than a month of liquidation proceeds, which exceeded expectations after expenses were deducted.
On Tuesday, the Ontario Superior Court approved Canada’s oldest company’s proposal to extend its creditor protection until July 31, which will allow it to complete liquidation and two other sales processes for leases, intellectual property and real estate.
“I think the distributions (to lenders) should be made. It might be beneficial to the estate as well, given the interest that continues to accrue on these not insignificant amounts,” said Justice Peter Osborne.
The court also granted the retailer permission Tuesday to repay $25 million in debt owed to Bank of America and to pay back from time to time about $140 million owed to Restore Capital.
The $25 million debt was part of an asset-based loan (ABL) agreement that Hudson’s Bay entered into with Bank of America in 2016. At that time, Hudson’s Bay’s U.S. entities, such as Saks off 5th and Saks 5th Avenue, jointly provided guarantees and collateral for these loans.
However, when Saks Global, the American sister company of Hudson’s Bay, acquired Neiman Marcus in December 2024, the ABL agreement was amended to release the U.S. entities from guarantees and collateral backing the loans.
Ashley Taylor, a lawyer for Hudson’s Bay, told the court on Tuesday that the American entities significantly deleveraged the Canadian business by paying down $1.36 billion of the previous $1.75 billion in debt as the Canadian business entered an amended ABL agreement.
“Those transactions were beneficial to the Canadian business, which was separated from the US business already,” and otherwise would have much higher debt, Taylor said.
Taylor’s statement was challenged by Joseph Pasquariello, a lawyer representing RioCan Real Estate Investment Trust, which co-owns the RioCan-Hudson’s Bay joint venture with Hudson’s Bay, and a lawyer representing Oxford Properties.
Pasquariello criticized Hudson’s Bay and the court-appointed monitor for providing only “little information” about the Neiman Marcus deal in their documents. He said he believes the transaction requires clarification and scrutiny, as the company has brought a new motion to repay the ABL loans.
As a result, he proposed that the payouts be postponed to a later date, but that was rejected by the court on Tuesday.
“Sure, there was a significant pay down in debt, apparently, 1.3 billion. But is that reasonable? Is it fair?” Pasquariello said.
Justice Osborne said he understands concerns about the Neiman Marcus deal, but noted that most of the loan repayments involve the $140 million that Hudson’s Bay owes Restore Capital after the transaction.
Hudson’s Bay has four secured lenders — the first in line to be repaid in an insolvency case: Bank of America, ReStore Capital, Pathlight Capital LP, and a numbered company associated with the Ontario Teachers’ Pension Plan.
Two other secured lenders will be next in line, with the remaining balance in bank accounts going to repay about $950 million owed to more than 1,000 creditors, including banks, landlords, some 9,000 employees and suppliers.
Most employees at Hudson’s Bay’s corporate office have been either laid off or received notice of their last day of work, and about 200 staff from the company’s e-commerce departments have been laid off since May 2, the Star learned from some employees. The retailer has announced that no severance packages will be offered upon termination.
