An Ontario judge has rejected a Hudson’s Bay Company restructuring agreement, increasing the likelihood that lenders may seek to push the company into receivership.
In a written decision issued Saturday, Justice Peter Osborne of the Superior Court of Justice said he declined to approve the agreement because it is “neither necessary nor appropriate at this time.”
The agreement wouldn’t have just given the embattled department store an April deadline to rescue its remaining stores but would have also handed increased power over the company’s creditor protection process to the retailer’s senior secured lenders.
The agreement would have imposed a weekly budget on the business that Hudson’s Bay would have regularly had to report to the lenders — companies whose loans are backed by collateral, thus allowing them to seize the retailer’s assets to cover unpaid debt.
If Hudson’s Bay reached a deal for the business with a new buyer, the agreement would have also required approval from the lenders.
Facing over a billion dollars of debt, the Hudson’s Bay Company has begun its liquidation process. An Ontario court gave the centuries-old retailer its blessing to sell off remaining stock at almost all its 96 stores. But as Liam Britten reports, bargain hunters might need to wait to find the best deals.
Osborne said he was “reluctant” to approve the agreement in part because the budget wasn’t submitted to the court or other stakeholders to review and would have granted the lenders with rights and protections “to the exclusion of other stakeholders.”
He also said the monitor appointed by the court to help guide Hudson’s Bay through its creditor protection proceedings is sufficient to balance the lenders’ rights with those of other stakeholders.
Osborne’s decision marks the latest milestone in the creditor protection proceedings that have engulfed Canada’s oldest company since it admitted on March 7 that its financial difficulties were so significant, it had been deferring payments to landlords and suppliers.
As part of those proceedings, Hudson’s Bay began liquidating this week all but six of its 80 Hudson’s Bay, 13 Saks Off Fifth and three Saks Fifth Avenue stores. The six that have so far been spared are split between the Greater Toronto and Greater Montreal areas. The company has also negotiated room to add or remove more stores from the liquidation.
Hudson’s Bay workers are speaking out after learning they will receive no severance pay as the company confirms it will pay out $3 million in bonuses to executives and managers handling the liquidation of most stores.
The restructuring agreement was fraught because some saw it as one of the only things holding back Hudson’s Bay lenders from asking the court to put the retailer…
Read More: Judge rejects Hudson’s Bay restructuring proposal intended to save
