Hudson’s Bay is firing back at one of its biggest lenders.
A new court filing from the defunct department store’s chief financial officer pushes back on the lender’s calls to subject the retailer to more oversight because it allegedly mishandled its liquidation and is hopelessly pursuing a deal to sell 25 of its leases.
In the documents, Michael Culhane says it’s “neither fair nor credible” for Hilco Global to criticize the retailer for “matters that were foreseeable, inevitable and/or, in many instances, driven by or contributed to by Hilco’s own conduct and commercial decisions.”
Financial services firm Hilco owns the Bay’s lead liquidator Hilco Merchant as well as Restore Capital, one of the retailer’s major lenders.
“Indeed, many of the results about which Hilco now complains are a direct consequence of Hilco’s own actions taken in its various capacities or were outcomes Hilco knew or should have known could occur when Hilco agreed to and participated in the various processes that it now criticizes,” Culhane says in an affidavit filed to the Ontario Superior Court on Sunday.
Restore Capital was among a group that loaned the Bay $151.4 million last December. It accused the retailer last week in a court filing of frittering away lenders’ collateral by pushing a deal to sell about two dozen leases to B.C. billionaire Ruby Liu.
B.C. billionaire Ruby Liu is hoping to expand her mall empire by taking over 28 former Hudson’s Bay retail space leases. She joined CBC’s Gloria Macarenko with a translator to share her vision for the department stores, in her first interview with English-language media in Canada.
Liu, who owns three malls, wants the 25 properties in Alberta, B.C. and Ontario to open a new department store named after herself. She has already bought back leases to three properties at her own malls used by the Bay and its sister Saks business for $6 million.
However, landlords have objected to her buying their leases because they say she has not provided a sufficient business plan, despite the Bay announcing its deal with her on May 23.
Restore said last week that it will ask a court on Tuesday to terminate the deal, which still needs landlord and court approval. On Saturday evening, it filed more documents bolstering its arguments and calling the Liu deal the “most striking” example of why its confidence in the Bay’s management “has fully unravelled.”
It said the “illusory” deal is a “misadventure” that is costing Restore and other lenders millions in rent and professional fees, which may increase the longer the Bay waits to seek court approval for the transaction.
“If the transaction fails, no proceeds will be realized and the astounding costs incurred, and to be incurred, in its pursuit, will never be recouped,” Restore warned.
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