B.C. billionaire Weihong (Ruby) Liu has already taken over three store leases in malls owned by Central Walk, the real estate investment company she chairs. She is looking to take over 25 more leases.DARRYL DYCK/The Canadian Press
The legal fight over a controversial deal to sell the leases of 25 former Hudson’s Bay stores to B.C. billionaire Weihong (Ruby) Liu was delayed on Tuesday, after Ms. Liu arrived in court without legal representation.
The deal, which covers stores in Ontario, Alberta and B.C., faces significant opposition. The majority of landlords have said they will dispute any attempt to force the assignment of the leases to Ms. Liu.
Tuesday’s hearing in Toronto was scheduled to deal with a motion from some of Hudson’s Bay’s senior lenders, who have asked the Ontario Superior Court of Justice to terminate the transaction.
ReStore Capital LLC, the agent for a syndicate of senior lenders to Hudson’s Bay, filed the motion last week.
Hudson’s Bay was back in court for a fight with one of its biggest lenders who wants it to terminate a deal it has to sell 25 of the retailer's leases to B.C. billionaire, Ruby Liu. The judge adjourned the hearing 'for a short period of time,' urging Ms. Liu to hire a lawyer to represent her and her plans to buy the leases.
The Canadian Press
Those lenders argue that since the deal is unlikely to succeed, Hudson’s Bay should not continue to spend cash that should be used to repay the company’s debts to instead pay rent to hold on to those store spaces, and other expenses, in hopes of completing the transaction.
In a new report filed shortly after midnight on the night before the hearing, the court monitor overseeing the process also wrote that the lease deal should be terminated.
“As of the date hereof, the potential lease purchaser has not: (a) provided additional information or responses to the various letters received from the landlords’ counsel; nor (b) obtained consent to the assignment from any of the landlords,” the monitor’s report stated.
According to the report, the cost to Hudson’s Bay of continuing to pursue the transaction is more than $4.7-million a month for expenses including rent, property taxes and estimated utilities.
Inside the final days of Hudson’s Bay
Ms. Liu, the chairwoman of real estate investment company Central Walk, based in Nanaimo, B.C., has already paid $6-million to take over three store leases in malls where there was no landlord opposition, because they are owned by Central Walk.
If successful, the deal for the remaining 25 leases could generate significantly more money for Hudson’s Bay to pay some of its debts.
But the court will need to consider whether the court monitor approves the proposed lease assignment, and whether it would be “appropriate” to transfer the rights and obligations, judge Peter Osborne explained during the hearing on Tuesday.
He urged Ms. Liu to retain new legal counsel, saying it is “very much in your interest” to submit materials to the court.
Justice Osborne also disclosed on Tuesday that Ms. Liu and Central Walk chief executive officer Linda Qin had e-mailed him directly last week, and reminded them that “in no circumstances should any party attempt to communicate directly with me” as court proceedings continue.
Justice Osborne added that he is “concerned” about the costs related to the delay, and urged Hudson’s Bay and other parties to schedule a hearing as soon as possible to deal with the motion.
“Some time has passed,” Justice Osborne said, referring to the weeks since the announcement of the Central Walk lease deal on May 23. “So I want to keep this moving.”
Struggling with sales declines, mounting losses and $1.1-billion in debt, Hudson’s Bay filed for court protection from its creditors on March 7, under the Companies’ Creditors Arrangement Act (CCAA). Canada’s oldest retailer closed all of its locations permanently on June 1.
The bidding process for the leases was designed to generate money toward paying back senior lenders. For the leases covered under the deal with Ms. Liu, there were no “alternative transactions with a higher prospect of completion,” according to a court filing from the retailer, and another 62 of the store locations received no bids.
Hudson’s Bay has already scheduled a hearing for July 31 to seek approval for another lease-assignment agreement with an unnamed party, covering eight former store spaces.
Outside the courthouse after the adjournment on Tuesday, Ms. Liu said that she plans to hire new legal counsel soon. Speaking in Mandarin translated by Ms. Qin, Ms. Liu added that lawyers from Miller Thomson LLP − the second law firm Central Walk has worked with during the process − dropped them as a client on Sunday after a dispute over legal fees.
Ms. Qin declined to answer questions about whether the company had hired any executives with retail experience to run the department stores she wants to launch.
Ms. Liu’s lack of experience as a retailer is among the concerns raised by landlords, along with the absence of details about the suppliers who will provide products for the stores, whether Central Walk has logistics in place to ship items to a 28-store network and to customers across Canada, and their assertion that financial projections provided by Central Walk are not realistic.
Plans for product suppliers are still in the works. Ms. Liu added that Central Walk plans to hold meetings with suppliers later this month, and invited both former Hudson’s Bay vendors and other companies to attend.
“We will work tremendously closely with HBC, with the monitor, to make business plans, to do all the preparations, to provide materials and try to satisfy every party’s request,” Ms. Liu said.
While speaking with reporters, she held a “Support Ruby Liu” sign featuring her photo and a QR code to a Change.org petition asking people to endorse her plan to take over the store spaces.
“We will provide jobs, create jobs. And we believe, we’re confident, and we’re prepared to do so,” Ms. Qin said, translating for Ms. Liu. Ms. Qin then raised her fist in the air.