Court Approves Hudson's Bay Liquidation Plan, Rent Agreement With RioCan

An Ontario court has approved Hudson's Bay Company's (HBC) plan to liquidate most of its stores, with sales starting on Monday, March 24. This decision follows HBC's filing for creditor protection under the Companies' Creditors Arrangement Act (CCAA) on March 7. The liquidation will affect 80 Hudson's Bay stores, three Saks Fifth Avenue locations, and 13 Saks OFF 5TH shops across Canada.

Despite the extensive closures, six stores are temporarily exempt from liquidation. These include the flagship store on Yonge Street in Toronto, as well as locations in Yorkdale Shopping Centre (Toronto), Hillcrest Mall (Richmond Hill), Downtown Montreal, Carrefour Laval (Laval), and Fairview Pointe Claire (Pointe Claire). HBC aims to secure a restructuring deal to keep these stores operational; however, if no firm commitment is reached by April 5, they may also face closure.

In an effort to address its financial challenges, HBC has entered into a restructuring support agreement with lenders Bank of America, Pathlight Capital, and Restore Capital. This agreement allows the company to proceed with the liquidation process while attempting to restructure its remaining assets. The lenders will have third-priority claims on the proceeds from the sales of HBC's inventory and assets.

HBC also plans to monetize its leases, many of which are considered valuable due to below-market rental rates. Montreal-based retail strategies firm Oberfeld Snowcap has been engaged to market these leases, including those of the six stores currently exempt from liquidation, as well as leases for four distribution centers.

A significant development in HBC's restructuring involves its relationship with RioCan Real Estate Investment Trust. The two companies co-own several properties, and HBC had initially sought to suspend rent payments to their joint venture. After negotiations, HBC agreed to pay approximately 70% of its rent obligations, totaling around $7 million per month, for 10 of the 12 jointly owned properties. The unpaid amounts will be secured as a fifth-priority charge.

The court's approval marks a critical step in HBC's efforts to navigate its financial difficulties. The company continues to seek long-term solutions to preserve parts of its operations while managing the complex challenges of restructuring a historic retail giant.