An exterior view of the Hudson’s Bay store in downtown Calgary, Alberta, on March 10.Amir Salehi/The Globe and Mail
Hudson’s Bay Co. may be forced to close all of its stores and will begin liquidation sales as early as next week.
Canada’s oldest retailer announced late on Friday that “despite exhaustive efforts,” the company has been able to secure only limited financing “that will require the full liquidation of the entire business,” encompassing 80 department stores across Canada.
The Globe and Mail first reported earlier this week that Hudson’s Bay was working on a restructuring plan that could keep roughly half of the stores open, if it could secure financial assistance from its landlords.
Possible concessions could include waiving the rent on stores for a period of time and financial contributions from those landlords to keep locations open. Those discussions have not yielded results, however.
“All such landlords declined to engage with the company in substantive discussions,” Hudson’s Bay Co. ULC chief financial officer Jennifer Bewley wrote in an affidavit filed in court Friday.
Discussions with landlords were still continuing late Friday, according to a source with knowledge of the matter. The Globe is not naming the source because they were not authorized to speak publicly about the discussions.
“The company remains hopeful that key stakeholders, particularly its landlord partners, will engage to explore a viable alternative restructuring path that could preserve jobs, tenancy in retail locations, and a company with deep historic significance before it is too late,” said a press release from Hudson’s Bay, issued late Friday.
“This alternative would necessitate significant capital and immediate and substantial cooperation from landlords and other critical partners.”
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Last week, Hudson’s Bay was granted court protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA). A court hearing is scheduled for this coming Monday, where the company will ask for an extension of the CCAA proceedings and will seek court approval to begin liquidating stores.
At the time of the initial filing, Hudson’s Bay had secured $16-million in initial debtor-in-possession (DIP) financing, a type of loan designed to allow companies to continue operating while undergoing a restructuring process. That loan has now been amended to $23-million. The interim financing comes from a group of lenders led by Restore Capital LLC, an affiliate of Hilco Capital Ltd., a British private equity firm that specializes in turning around distressed companies.
Looking at the company’s cash-flow forecast for the next 13 weeks, the lenders have indicated that liquidation of all the Hudson’s Bay stores is necessary to ensure the company pays back both the DIP financing and other secured creditors, according to Ms. Bewley’s affidavit.
Hudson’s Bay is continuing to look for alternatives, including selling the business, selling property and leases, or finding financing that would allow the company to continue operating in some form. Hudson’s Bay is planning to review offers from any potential bidders that may emerge by the middle of April.
Any such sale would have to involve repaying the company’s senior debt, according to Ms. Bewley’s affidavit. Hudson’s Bay had $430-million outstanding under three credit facilities. The company also carries $724.4-million in mortgage debt, for a total of $1.1-billion in outstanding secured debt obligations as of that date.
“Our team has worked incredibly hard to identify a viable path forward, and our resolve is strengthened by the overwhelming support from customers and associates who have shared heartfelt stories about Hudson’s Bay and what our stores have meant to them, their families, and their communities across the generations,” Liz Rodbell, president and chief executive officer of Hudson’s Bay, wrote in Friday’s press release. “These powerful experiences remind us why we must continue to pursue every possible opportunity to secure the necessary support from key landlords and other stakeholders to save The Bay.”
Hudson’s Bay stores, as well as the Saks Fifth Avenue and Saks Off 5th stores that the company operates in Canada under a license from Saks Global, will remain open during liquidation sales. E-commerce site TheBay.com will keep operating “for a limited time,” according to the release.
The company had previously disclosed that it would continue to honour customers’ gift cards in its stores, although it suspended the sale of more gift cards earlier this week. However, now that Hudson’s Bay is beginning liquidation sales, it has put a deadline on the use of those gift cards: they will be valid only until April 6. Shoppers may use gift cards during liquidation sales until that date. As of Feb. 1, customers held roughly $24.1-million worth of outstanding gift cards in total.
The retailer’s loyalty program remains suspended, meaning that members cannot earn points on purchases or redeem points they currently have. The outstanding points on loyalty members’ accounts were worth a total of roughly $58.6-million, as of Feb. 1.
Assuming the company receives court approval for the liquidations, it will share further details about the process in the coming days, the release said.