- What Hudson’s Bay plans to restructure its business around a “core number” of locations
- Why The 355-year-old retailer was granted creditor protection
- What next The firm hasn’t said how many of its approximately 80 stores could be axed
Hudson’s Bay Canada plans to restructure its business around a “core number” of locations by monetizing some retail leases, liquidating inventory and slashing some of its 80-plus stores.
The 355-year-old retailer, buried in $1.1bn of secured debt, was granted creditor protection on Friday under the Companies’ Creditors Arrangement Act. The initial order gives the company protection from its creditors for 10 days, with extensions possible.
The court also approved debtor-in-possession financing worth $16m from a group of lenders led by Restore Capital, an affiliate of Hilco Capital, a UK private equity firm specialising in turning around distressed companies. Alvarez & Marsal Canada has been approved as the court-appointed monitor.
In its application to the Ontario Superior Court of Justice for a stay of proceedings and immediate access to debtor-in-possession financing, the firm cited a “severe” and “imminent” liquidity crisis and Canada’s brewing trade war with the United States.
The company intends to monetize some of its retail leases “that hold value due to below-market rent,” it said in the initial filing, and “realign its operations around a core group of high-performing retail locations.”
Hudson’s Bay did not indicate how many of its 80 branded stores could end up on the chopping block, but The Globe and Mail reported it could be upward of half if the company can secure concessions from landlords.
Hudson’s Bay’s leases are mostly located in malls, strip malls and other shopping centres.
In her affidavit, chief financial officer Jennifer Bewley said the company had been in “advanced discussions” with potential lenders this year and was confident it could refinance some or all of its debt. “However, the trade war and the ensuing uncertainty in financial markets made it extremely challenging for Hudson’s Bay to raise incremental financing and monetize its real estate assets,” she said.
“While tariffs directly affect trade, they also have far-reaching secondary effects, such as higher borrowing costs, increased cost of goods, depressed real estate valuations, currency fluctuation, and lower consumer and lender confidence,” the court documents continued.
At least 68 of the company’s locations are leased from third-party landlords; 12 more are leased or subleased from the RioCan-Hudson’s Bay joint venture or its subsidiaries. All three Saks Fifth Avenue stores are leased from a third-party landlord, and 13 of the Saks OFF 5TH stores are leased from third-party landlords.
The company effectively owns seven of its locations through the RioCan-Hudson’s Bay JV, in which the firm holds a 78% interest via its wholly owned subsidiary Hudson’s Bay Holdings.
The company has not paid rent at “several” of its leased stores.
“Without a stay of proceedings and immediate access to DIP financing, Hudson’s Bay will be unable to meet its obligations as they come due and will be forced to shut down operations, which would be extremely detrimental to their landlords, suppliers, lenders, customers, and their approximately 9,364 employees,” the company said in the court filing last week.
The next court date — a comeback hearing — is set for March 17.
