Hudson’s Bay heads back to court Friday in a high-stakes bid to transfer 25 store leases to B.C. billionaire Weihong Liu — a move that has nearly all shopping mall landlords involved fighting to stop.
The case is unconventional in many ways, as Liu, the chairwoman of shopping mall owner Central Walk, seeks to launch a new department store chain across three provinces to occupy the former Hudson’s Bay locations, while landlords of 24 out of 25 leases oppose her plan, warning it is poised to “fail in the short term.”
At Thursday’s hearing in Ontario Superior Court, Justice Peter J. Osborne said he could not identify any other compelled assignment case involving such a large number of leases without the consent of the landlords.
He also acknowledged that the Companies’ Creditors Arrangement Act allows the court to approve an assignment over counterparties’ objections, but he is weighing the balance between the creditors’ gain and the sweeping impact of the bid on the landlords.
“The Central Walk transaction is the last and only chance to monetize any of the retailer’s leases,” said Maria Konyukhova, Hudson’s Bay’s lawyer, on Thursday.
She argued the transaction would generate $50 million for the retailer’s nearly 1,900 creditors, but posited that only the two secured creditors, which have the highest priority, Pathlight Capital and Restore, could benefit from this.
Restore, however, also opposes Liu’s $69-million bid, contending that most of the proceeds favour Pathlight.
On Thursday, Osborne also heard from Jeremy Opolsky, counsel for Cadillac Fairview, on behalf of other opposing landlords, who argued Liu’s bid is essentially “a bad deal.”
Opolsky argued that it is unfair to lock landlords into long-term leases with Liu, who lacks department store expertise, an experienced management team, brand recognition, or goodwill, and is relying on an “improvised, constantly shifting” business plan.
He pointed to a third-party EY report filed by Cadillac Fairview that concludes the financial forecast and proposed store opening timeline in Liu’s business plan are “unrealistic” and “unreasonable.”
Lawyers for Hudson’s Bay and Pathlight Capital rebutted landlords’ concerns, saying their demands for a “guarantee of success” in the business plan set an unrealistically high bar for any proposed assignee under the CCAA.
On Friday, the judge is expected to hear from the court-appointed monitor overseeing the proceedings, which also opposes Liu’s bid, noting in its report that while Liu’s company could “meet the financial obligations” under the leases, it might fall short on non-monetary commitments.
The court could deliver its ruling at the end of the hearing on Friday.
This is a developing story…
