2 weeks Ago
Hudson’s Bay in Park Royal shopping centre in West Vancouver, B.C. on March 27.
Isabella Falsetti/The Globe and Mail A proposed agreement that would have given Hudson’s Bay Co.’s senior lenders the ability to control the retailer’s restructuring has been struck down by the court – introducing the possibility that those lenders will attempt to push the company into receivership. The decision, published on Saturday, follows two days of arguments this week over whether additional “guardrails” over the Bay’s liquidation were needed, as proposed by the lenders – Bank of America N.
A., Pathlight Capital LP and Restore Capital LLC. In order to provide those guardrails, the retailer and the lenders negotiated a “restructuring support agreement” that would have required Hudson’s Bay to abide by a budget during its store liquidations, submitted to the lenders on a weekly basis.
It also would have required the lenders’ approval for any transaction that may have resulted from the Bay’s efforts to find a buyer for part of its operations, and to continue to exist in some form with new owners. But the agreement “is neither necessary nor appropriate,” Ontario Superior Court Justice Peter Osborne wrote in his decision on Saturday. He noted that the creditor-protection process already provides sufficient oversight “to protect the interests of the lenders while balancing those interests against the rights of other stakeholders” while Hudson’s Bay conducts liquidation sales and also solicits bids for the business.
Hudson’s Bay Co. terminates nearly 200 corporate employees as liquidation job losses begin I worked at the Bay years ago, and still remember the magic and thrill of the department store Hudson’s Bay received court protection from its creditors on March 7, under the Companies’ Creditors Arrangement Act. Two weeks later, the court granted approval for the retailer to begin liquidating all but six of its stores.
On Monday, 74 Hudson’s Bay stores, as well as two Saks Fifth Avenue and 13 Saks Off Fifth stores, launched the clearance sales. The lenders argued in court that they needed “guardrails” because in order to run those liquidation sales – and to keep the handful of locations open while Hudson’s Bay sought a plan for its future – the retailer was spending cash on its operations and selling off inventory over which the lenders have a security interest. That potentially eroded the ability for Hudson’s Bay to eventually repay the lenders, they said.
Lawyers for Hudson’s Bay acknowledged that the agreement was “not a very satisfying outcome for the company,” but said that it would prevent a protracted fight with its lenders and allow the liquidation to proceed in an orderly manner. However, lawyers for the company’s landlords pushed back, saying the proposed plan gave the lenders too much control over the process. They further argued that the lenders’ plan to ask the court to put Hudson’s Bay into receivership if the agreement was not approved, was tantamount to a “threat” to the court.
Justice Osborne declined in his decision to make a determination on whether the statement was indeed a threat. “If the lenders or any other party bring a motion in this proceeding, the court will consider it at that time, based on the evidence in the record,” he wrote..
