After a fraught week of contentious court hearings in which the future of Hudson’s Bay hung in the balance, the Ontario Superior Court has approved the beleaguered retailer’s plans to liquidate all but six of its stores.
“In my view, there’s no alternative but to approve the liquidation effective immediately to maximize the chances of success,” Ontario Superior Court Justice Peter J. Osborne told a court hearing Friday afternoon.
“I’m satisfied that if we’re going to maximize whatever chances there are to recover, we’ve got to do this quickly.”
The department store chain, Canada’s oldest company, told the court earlier on Friday that it plans to liquidate all of its stores, with the exception of six locations, after it entered creditor protection earlier this month. Liquidation is to start Monday.
The company had initially planned to liquidate all of its locations, which include 80 Bay stores, three Saks Fifth Avenue stores and 13 Saks Off 5th stores, and nearly half a billion dollars worth of inventory, after the company failed to secure financing to restructure.
Court documents show that the six locations the company wants to keep out of liquidation, at least temporarily, are its flagship store at Yonge and Queen streets in Toronto, the store at Yorkdale mall, one at Hillcrest Mall in Richmond Hill, as well as three Quebec locations, specifically in downtown Montreal, the Carrefour Laval mall and Pointe-Claire.
Ashley Taylor, a lawyer for Hudson’s Bay, told court on Friday that the company has seen an unexpected spike in sales which gives the company sufficient funding to pay off $16 million in debtor-in-possession (DIP) financing, a form of capital companies in distress can borrow to essentially tide them over while they attempt to restructure. The company had said earlier it may require as much as $23 million, but on Friday said that extra financing was no longer needed.
“Sales have exceeded the expectations of the company and monitor,” said Taylor.
Taylor added the company is in discussions with its landlords to find any opportunities for restructuring. If there are opportunities to restructure, “the time remaining to do so is very limited,” said Taylor, adding that if a solution is not found very quickly, the six stores will be added to the liquidation sale.
“We are looking to find a restructuring solution and we will continue to work hard,” he added.
Court documents say any liquidation sales would finish by June 15.
Andrew Hatnay, a lawyer representing some Hudson’s Bay employees and retirees, said he is not satisfied with the fact that Hudson’s Bay plans to pull six stores out of the liquidation list, as it still means mass termination, if not all of its more than 9,000 employees, he added.
“This is not a good thing today,” Hatnay said. “This is the demise of the HBC.”
He added that he expects more than $100 million in severance claims and is still trying to get information on the financial standing of the pension plans.
Justice Osborne also heard concerns from some landlord lawyers during Friday’s hearing, including Cadillac Fairview, which lent Hudson’s Bay $200 million two years ago. David Bish, a lawyer for Cadillac Fairview, expressed concern about the fact that some materials for Friday’s hearing were not sent to all relevant stakeholders until 20 minutes before the hearing began. Other court records were sent to stakeholders at 3 a.m. Friday.
“I think it’s very important to understand, from a process standpoint, parties received a motion record at about 20 minutes before the court hearing began,” Bish told the court. “No one, myself included, has had time to explain to their clients all of the things that are going on.”
Bish added that while he only got little to no time to read the new restructuring support agreement submitted by Hudson’s Bay, he will oppose the proposal, which he said means the DIP lenders are “getting all of the powers that serve the company in no way.”
