A Canadian retail icon is on its last legs as Hudson’s Bay Company plans to liquidate its entire business by June, with the process starting as early as next week.
Pending court approval on Monday, the centuries-old retailer plans to liquidate its inventory, furniture, fixtures, and equipment at its 80 stores across the country by June 15. The company will also monetize its leases with landlords and kick off a sales process to seek last-minute buyers or investors for its distressed business, according to court documents.
“This full liquidation is really a disastrous outcome for the Bay, and it’s terrible that it’s coming to this so quickly for this iconic company,” said Andrew Hatnay, a lawyer with Koskie Minsky, who is also representing some Hudson’s Bay employees and retirees.
Speaking on whether the June 15 deadline could be extended or shortened by the company and liquidation consultant, Hatnay said, “That’s a tight timeline. It’s troubling that there doesn’t seem to be much restructuring efforts taking place.”
The news that struck late Friday night marks a stark reversal from just a week ago when the company filed for creditor protection under the Companies Creditors Arrangement Act (CCAA) with the intention of keeping the company afloat and much of its sprawling footprint operational as possible.
But more than 9,000 jobs will be eliminated across the country if the company shuts its doors.
“Full liquidation means the company is not restructuring in some form so that it can continue in business,” said Hatnay, adding it would also mean that “all the inventory will be sold, the real property will be sold, all other assets will be sold, employees would be terminated, and eventually the company would cease to exist.”
“It sounds to us that if HBC is planning to liquidate under CCAA, the end result won’t be much different from a bankruptcy,” he added.
The company said in a Friday night press release that its stores will remain open and running normally during the liquidation process until their final closing dates. Customers will be able to use remaining gift cards in stores until April 6, and the loyalty program will remain suspended, according to court documents.
Hudson’s Bay explained it has been forced toward a full liquidation because “exhaustive” efforts haven’t turned up the sufficient financing it needs to pursue restructuring options.
The company, however, is holding onto a sliver of hope that key stakeholders, especially its landlords, will collaborate on an alternative restructuring plan to help preserve jobs and maintain retail locations to avoid a full shutdown, the press release said, adding this scenario would require “significant capital.”
“Our team has worked incredibly hard to identify a viable path forward, and our resolve is strengthened by the overwhelming support from customers and associates,” said Hudson’s Bay president and CEO Liz Rodbell in the press release.
The company did not respond to a request for further comment Saturday.
Hudson’s Bay had secured $16 million in debtor-in-possession (DIP) financing — a form of capital companies can seek for restructuring purposes — on March 10 and plans to raise that amount to $23 million if it gets court approval on Monday.
“I understand that from the perspective of the DIP Lenders, all illustrative models for the Companies’ 13-week cash flow forecast indicated that an immediate commencement of the Liquidation Sale across all retail stores was necessary in order not to jeopardize the potential recovery of the DIP Loan,” said Hudson’s Bay’s chief financial officer Jennifer Bewley in the court documents.
Dwayne Gunness, president of Unifor Local 40, told the Star the union was waiting on the court hearing on Monday to learn of the company’s restructuring plans but “this news that they have put out just changed the dynamics of everything.”
“We are as surprised as everyone else,” said Gunness, whose union represents nearly 600 employees at the Kitchener and CF Sherway Gardens locations, as well as the company’s e-commerce department.
Gunness said the pension plan and the entitlement are the main concerns of the employees, who worry the company is suffering the same fate as Sears Canada. In 2018, Sears Canada reported an enormous deficit in the pension plan when it went out of business, resulting in reduced payouts in retirement for its employees.
“Some members have put in 20, 30 years with the employer. And what’s even more sad about this is the fact that the majority of the members are predominantly women, and they made Hudson’s Bay their career,” Gunness said.
Hatnay said he is waiting to find out the financial status of the pension plan and is not confident Hudson’s Bay has the money to pay employees severance.
It’s “premature” to speculate whether Hudson’s Bay will liquidate all of its stores or retain its brand in some form, said Hatnay, adding that a sale of trademarks and intellectual property is possible during the liquidation process.
“The news is not good, but how this emerges at the end of the liquidation process, we will have to wait and see,” he said.
The company, founded in 1670, owes a total of $950 million to nearly 1,900 creditors — including landlords, fashion brands, Ontario Teachers’ Pension Plan Board (OTPPB) and Canadian governments, according to court documents.
Ralph Lauren is owed $16 million, Estée Lauder is owed $9 million, and OTPPB is one of the largest landlord creditors, with its subsidiary that owns Eaton Centre owed $5 million and another $1 million owed to its subsidiary, Cadillac Fairview.
The retailer also owns and operates three Saks Fifth Avenue stores and 13 Saks Off 5th locations through a licensing agreement.
