Hudson’s Bay Co. will decide on a buyer or buyers for its assets and store leases by early to mid-June.
During a court appearance on Tuesday, Ashley Taylor of Stikeman Elliott LLP, who is representing HBC, provided the timeline, saying that the company will be back in court in two to three weeks to seek approval of one or more transactions.
Canada’s oldest retailer has received 17 bids for its assets and operations, according to court documents. Those could include bids on the company’s intellectual property, such as its historic stripe design, the Hudson’s Bay name, and private label brands. They could also include bids on records such as customer databases and other company assets.
In a separate bidding process for the Bay’s store leases, 12 parties submitted bids on a total of 39 leases, with many of the bidders indicating interest in the same locations. A number of those parties submitted bids for leases in connection with the asset sale, which indicates interest among some buyers in reconstituting retail operations in the future using some Bay assets.
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By the time a buyer or buyers are selected, the stores will be largely empty. Ninety per cent of the inventory previously held in the Hudson’s Bay distribution centre has been sent to stores, with the rest in transit this week, and liquidation sales are expected to conclude by June 1. After that date, the store furniture and fixtures will be cleared out and the retailer will vacate stores no later than the end of June.
Those liquidation sales have already yielded significant cash for Hudson’s Bay, which the company will now use to begin paying off its senior debt.
On Tuesday, Ontario Superior Court Justice Peter Osborne approved a motion that will allow the company to repay as much as $165-million outstanding under two credit facilities.
Burdened by $1.1-billion in debt and mounting losses, Hudson’s Bay was granted court protection from its creditors on March 7 under the Companies’ Creditors Arrangement Act.
The court on Tuesday also approved an extension to the relief period under CCAA in order to complete the liquidations.
Those clearance sales began in late March at 74 Hudson’s Bay stores, as well as two Saks Fifth Avenue and 13 Saks OFF 5th stores the company operates in Canada. On April 25, the retailer added the six remaining stores to its liquidation sales after an earlier plan to try to find a buyer or investor to operate a scaled-down version of the store chain was unsuccessful.
That move generated another wave of enthusiasm for the sales, which have “generated cash in excess of the Applicants’ operating needs,” according to an affidavit sworn on May 7 by Hudson’s Bay chief financial officer Jennifer Bewley.
From April 19 to May 2, Hudson’s Bay reported $129.5-million in receipts, roughly 40 per cent more than the company had estimated in a previous forecast. The company had approximately $194-million in cash as of May 2, $70.3-million more than it had expected.
In court on Tuesday, Hudson’s Bay’s lawyer argued that the excess cash should be used to pay down debt, which continues to accrue interest. The initial payment will direct $25-million to pay off the entirety of one revolving credit facility, for which Bank of America acts as the agent on behalf of various lenders. It will also direct $40-million to $46-million to Restore Capital LLC, to reduce the debt on another credit facility with various lenders, which has a total outstanding amount of $140-million. Further payments on that debt could be made in future, Mr. Taylor told the court.
The court approved both the debt payments and the extension of the process until July 31.
The motion for the debt payments was opposed by lawyers for RioCan REIT, which is a landlord to the store chain and also has a stake in some Hudson’s Bay properties under a joint venture.
Joseph Pasquariello, a lawyer with Goodmans LLP representing RioCan, raised concerns about the lenders being paid earlier in the process before a future had been determined for the retailer’s assets and leases.
Mr. Pasquariello also questioned whether more information was needed about how much debt was left with the Canadian company after a US$2.65-billion deal in which parent company HBC LP acquired Neiman Marcus, the struggling U.S. luxury department store chain, with investments from Amazon.com Inc. and Salesforce Inc.
The closing of that deal in December, 2024, created a new company, Saks Global, which holds all of HBC’s U.S. retail assets and US$7-billion worth of real estate assets. The Canadian operations became a separate stand-alone company at that time.
HBC’s lawyer, Mr. Taylor, told the court that following the Neiman Marcus deal, the indebtedness of the Canadian operations was reduced by approximately $1.36-billion. The U.S. business was also released from obligations with regard to the Canadian debt. The repayments approved on Tuesday are toward new debt that was secured after that transaction, Mr. Taylor told the court.
Mr. Pasquariello said it was “curious” that the Canadian operations entered into creditor protection within three months of the transaction, while there has been no insolvency filing for the U.S. business.
“There are properly questions to be put to the company and to the lenders in respect of this,” he said.