Court Decision Rejects Agreement That Would Have Given Hudson’s Bay Lenders Control over Restructuring
Hudson’s Bay Co. has been denied court approval for a proposed agreement that would have allowed senior lenders to control the retailer’s restructuring, potentially pushing the company into receivership. The decision follows arguments over whether additional “guardrails” were needed for Hudson’s liquidation, as proposed by lenders Bank of America N.A., Pathlight Capital LP, and Restore Capital LLC.
The restructuring support agreement required Hudson’s Bay to abide by a budget during store liquidations and require lenders’ approval for any transactions resulting from Hudson’s efforts to find a buyer for part of its operations. However, Ontario Superior Court Justice Peter Osborne stated that the agreement was neither necessary nor appropriate.
Lenders argued in court that they needed “guardrails” because the retailer was spending cash on its operations and selling off inventory over which the lenders have a security interest. Lawyers for Hudson’s Bay acknowledged that the agreement was not satisfying but said it would prevent a protracted fight with its lenders and allow the liquidation to proceed in an orderly manner.
Source: Globe and Mail
Source: The Star
Source: Financial Post
Hudson’s Bay Cuts 200 Corporate Jobs Effective April 4
Hudson’s Bay has informed about 200 corporate staff that their employment will be terminated due to restructuring processes. The move follows the company filing for creditor protection earlier this month. Court documents show the company had 533 workers in corporate roles at the end of February. The 200 jobs will be eliminated as of April 4. The liquidation process is expected to last until mid-June, reducing the workforce to around 9,300. Hudson’s Bay is committed to treating associates impacted by these changes with respect and support.
Source: Financial Post
Last Six Hudson’s Bay Stores Also Headed for Liquidation — Unless a Solution Is Found by April 4
Hudson’s Bay is facing insolvency and is attempting to keep six of its top-tier stores open. The Ontario Superior Court approved the company’s proposal to liquidate most of its business, bringing its 355-year legacy closer to its final chapter. The six retail stores Hudson’s Bay wants to keep in normal operation could also enter liquidation if the company can’t find a solution to save its business by April 4. However, experts and lawyers are not optimistic that Hudson’s Bay will find buyers or investors to support a restructuring deal within this short time frame, especially after months of unsuccessful attempts.
The revised plan to keep six stores open includes its flagship store at Yonge and Queen streets in Toronto, the store at Yorkdale mall, one at Hillcrest Mall in Richmond Hill, and three locations in Quebec. These brick-and-mortar stores likely have higher foot traffic and generate more revenue than the other stores facing liquidation, allowing them to sustain themselves for longer.
The company has about $3 million in cash on hand as of Jan. 1, as well as $1.13 billion in secured debt, and owes nearly 1,900 unsecured creditors about $520 million. Cash-flow projections predict Hudson’s Bay would have $156 million in cash on hand after expenses, far less than its $257 million in senior secured debt.
A component to the restructuring of Hudson’s Bay could include a sale process with regard to the company’s intellectual property, including the company’s iconic stripes and logo. The time leading up to April 4 is designed to give the company one last chance to come up with a Hail Mary solution to find financing that can pay its debts and preserve the brand name.
Source: The Star
Hudson’s Bay Plan to Liquidate All but Six Stores Gets Court Approval
Hudson’s Bay Co. has received court approval to liquidate all but six of its 96 stores, as the company tries to pay back the millions of dollars it owes to its creditors and not shut down completely. The stores not planned to liquidate are its flagship store in downtown Toronto, Yorkdale Shopping Centre, Hillcrest Mall in Richmond Hill, Ontario, and three in the Greater Montreal Area: Carrefour Laval mall, Pointe-Claire mall, and the downtown location.
However, HBC is currently in discussions with the landlords of those stores to see if there is an opportunity to restructure. If it can’t find a solution quickly, these outlets may also be liquidated. HBC has been struggling to pay its landlords, vendors, and service providers, and it was also concerned that certain landlords would lock the company out. The court approved the company’s liquidation request, along with others.
The hearing also showed that sales at HBC’s stores exceeded expectations in the past week following the news of the company’s potential closure, so the company won’t require a loan to conduct the liquidation sale, lease monetization process, and other processes. The company also agreed to pay about $7 million per month to its joint-venture partner RioCan Real Estate Investment Trust, one of Canada’s largest REITs, which co-owns several HBC stores.
HBC’s closure is expected to impact over 9,000 employees, according to a lawyer representing some of the company’s workers. The closure is expected to result in substantial severance claims for the employee population, with an expected total of over $100 million.
Source: Globe and Mail
Hudson’s Bay to Give $3 Million in Bonuses to Managers — While Confirming No Severance Pay for Workers
Hudson’s Bay is set to liquidate most of its stores and is set to give bonuses to 120 managers and executives. The bonuses will be paid in one lump sum by September 30 if these employees’ services are no longer required. The remaining employees, who are facing layoffs in the coming weeks as the company starts liquidating all but six of its 96 stores under protection from the Companies’ Creditors Arrangement Act (CCAA), will not receive severance pay.
The company intends to pay wages and salary earned for services rendered up to an associate’s termination date. Hudson’s Bay posted 41 new jobs for a “Fixed Term Sales Associate” position, with 24 of these jobs for stores in Ontario and 10 in the Greater Toronto Area. The postings promise a starting wage of $17.40/hour. Employment lawyers have stressed that any amount of severance pay would be far less than employees could have expected normally, describing the situation as bad news.
While people are usually entitled to severance in normal circumstances, those rules “effectively go out the window” when a company files for creditor protection under the CCAA. This could be particularly devastating for the thousands of employees who have spent years or decades working at the Bay and could have expected up to 24-months worth of severance pay.
Hudson’s Bay owes $950 million to nearly 1,900 creditors, including landlords, fashion brands, banks, and the Canadian government. Another $430 million is owed to secured creditors, who will be prioritized over its employees. The bonuses Hudson’s Bay plans to pay the group of 121 staff are not uncommon for a company attempting to pay back its creditors under the CCAA.
Unionized employees might also be granted protection under their collective agreement. Almost 650 of the Bay’s employees are unionized, with 598 of these workers based in Ontario. Some employees in Unifor unions are entitled up to $35,000 in severance under their collective agreement. Unifor national president Lana Payne has called the situation “disgraceful, enraging, and outrageous,” urging all levels of government to take action to ensure workers aren’t “treated as afterthoughts” during the liquidation. Andrew Hatnay, a lawyer representing employees, told the court he expects over $100 million in severance claims to be made.
Source: The Star
