Hudson鈥檚 Bay, a company older than Canada itself, will begin liquidating all but six of its stores Monday, bringing a story 355 years in the making close to its end.
After a fraught week of contentious court hearings in which the future of the company hung in the balance, the Ontario Superior Court approved the beleaguered retailer鈥檚 proposal to liquidate most of its business after it filed for creditor protection earlier this month.
The court also granted the company the right to 鈥渢erminate or temporarily lay off any of their employees as they deem appropriate,鈥 putting some 9,000 jobs on the chopping block.
鈥淭his is the art of the possible and we are where we are today,鈥 Ontario Superior Court Justice Peter Osborne told a 海角社区官网courtroom Friday packed with union members, suppliers and lawyers for various stakeholders.
鈥淚n my view, there is no other alternative but to approve the liquidation effective immediately to maximize the chances of success.鈥
The once聽powerful聽retail empire, known for its trademark stripes, was founded in 1670 and has a controversial history as a forceful player in the fur trade.聽
But recently it says it has been facing 鈥渟ignificant鈥 economic headwinds, including a post-pandemic decline in store foot traffic and trade war tensions with the U.S.
The company had initially planned to liquidate all of its locations, which include 80 Bay stores (36 located in Ontario), three Saks Fifth Avenue stores and 13 Saks Off 5th stores. In the process, it is expected to sell off nearly half a billion dollars worth of inventory.
It now seeks to keep six stores open, but will liquidate everything from clothing and shoes to racks and fixtures at the remaining stores by June 15 and the stores will be vacant by June 30, according to court documents.
The six locations the company wants to continue running, at least temporarily, are its flagship store at Yonge and Queen streets in Toronto, the store at Yorkdale mall, one at Hillcrest Mall in Richmond Hill, as well as three Quebec locations, specifically in downtown Montreal, the Carrefour Laval mall and Pointe-Claire.
Customers will be able to use remaining gift cards in stores until April 6, but Hudson鈥檚 Bay鈥檚 loyalty points program will remain suspended. As of Feb. 1, Canadian customers had outstanding gift cards worth a total value of approximately $24 million.
Ashley Taylor, a lawyer for Hudson鈥檚 Bay, told the court the company has seen a recent unexpected spike in sales since it publicly announced that it was seeking creditor protection.
This has provided the company with sufficient funding to help pay off $16 million in debtor-in-possession (DIP) financing, a form of capital companies in distress can borrow to tide them over while they attempt to restructure.聽The surprising sales have also allowed the company聽to pay off a portion of rent it owes to RioCan-Hudson鈥檚 Bay JV 鈥 a joint venture with RioCan Real Estate Investment Trust.
Taylor said the company no longer requires additional DIP financing of $7 million it sought earlier. 鈥淪ales have exceeded the expectations of the company and monitor,鈥 he said.
Taylor added the company is in discussions with its landlords to find any opportunities for restructuring. If opportunities are found, 鈥渢he time remaining to do so is very limited,鈥 said Taylor, adding that if a solution is not found quickly, the six stores will be added to the liquidation sale.
鈥淲e are looking to find a restructuring solution and we will continue to work hard,鈥 he added.
The court also granted the company permission to put its leases with landlords聽for sale, in order to generate proceeds to help pay off its massive debt. The retailer is still clinging to a shred of hope that its intellectual property, including trademarks, along with some of its stores, will survive as it continues to seek last-minute buyers and investors.
Hudson鈥檚 Bay retains the right to remove some locations from the liquidation list if it can secure a deal.
Retail analyst Bruce Winder said it鈥檚 his view that Hudson鈥檚 Bay is keeping six of its stores temporarily open to do two things: showcase the stores for any potential buyers; and also to provide the court with some hope that creditors might be able to get some money back.
鈥淭hese top six stores could be an interesting little business,鈥 Winder said. 鈥淚 see this as a tactical move to get the liquidation across the finish line and a tactical move to showcase a few crown jewels to see if they can stimulate someone to buy some of the chain.鈥
Andrew Hatnay, a lawyer representing some Hudson鈥檚 Bay employees and retirees, told the court that the company鈥檚 plan to pull six stores out of its liquidation list is not good enough, as most of the company鈥檚 9,364 employees will still be terminated.
鈥淭his is not a good news day,鈥 Hatnay said. 鈥淭his is the demise of the HBC, slowly but surely.鈥
He added that he expects more than $100 million in severance claims and is still trying to get information on the financial standing of the pension plans. Layoffs may not happen immediately as Hudson鈥檚 Bay still needs a workforce to help with the liquidation.
Hatnay told the Star after Friday鈥檚 hearing that he believes the normal operation of the six stores to remain open temporarily will be helpful to employees in the short term, but the longevity of those stores is a 鈥渂ig unknown.鈥
鈥淚t鈥檚 a terrible day for the employees. We鈥檙e getting calls that they鈥檙e very upset and distressed about their futures,鈥 said Hatnay, who added he had been contacted by many 20- to 30-year employees and retirees.
Justice Osborne also heard concerns from some lawyers representing landlords, including for Cadillac Fairview which leases space to a dozen Bay locations, that some materials for Friday鈥檚 hearing were sent to stakeholders less than half an hour before court began, while other records were emailed at 3 a.m.
鈥淚 think it鈥檚 very important to understand, from a process standpoint, parties received a motion record at about 20 minutes before the court hearing began,鈥 said David Bish, a lawyer for Cadillac Fairview. 鈥淣o one, myself included, has had time to explain to their clients all of the things that are going on.鈥
Bish added that while he had almost no time to read the new restructuring support agreement submitted by Hudson鈥檚 Bay on Friday, he will oppose the proposal, which he said means the DIP lenders are 鈥済etting all of the powers that serve the company in no way.鈥
The court hearing will resume Wed., March 26 to address this agreement, along with other issues raised by the landlord lawyers.
As of Jan. 1, the company had about $3 million in cash on hand, $1.13 billion in secured debt, and owed its nearly 1,900 unsecured creditors 鈥 such as brands, governments and landlords 鈥 about $520 million.
鈥淚鈥檓 satisfied that if we鈥檙e going to maximize whatever chances there are to recover, we鈥檝e got to do this quickly,鈥 Osborne said.
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