The Hudson’s Bay Company returned to court on Wednesday, March 26, seeking approval for a critical agreement with senior lenders that could determine the fate of six of its Canadian stores. Under the proposed deal, the company has until April 7 to secure viable offers for the stores—otherwise, liquidation will begin at those locations as well.
The stores in question are three in the Greater Toronto Area and three in the Montreal region, including the downtown Toronto flagship that also houses a Saks Fifth Avenue store operated under licence. These were excluded from earlier liquidation plans.
“The company wanted more stores, the company wanted more time and latitude to find a solution,” said Ashley Taylor, a lawyer representing Hudson’s Bay, during the Wednesday hearing. “But that was the best we could negotiate at the time.”
Lenders Push for ‘Guardrails’ Amid Restructuring
Hudson’s Bay’s lenders—Bank of America N.A., Pathlight Capital LP, and Restore Capital LLC—are seeking stronger assurances in the form of what’s called a Restructuring Support Agreement (RSA). Without such an agreement, they said they would ask the court to appoint a receiver over Hudson’s Bay’s assets.
“To be honest, it was not a very satisfying outcome for the company,” Taylor admitted, adding that two weeks is not a long time to secure a future for six key locations.
Liquidation Underway at 74 Hudson’s Bay Stores
The retailer, which entered creditor protection on March 7 under the Companies’ Creditors Arrangement Act (CCAA), already received court approval on March 21 to begin liquidation at 74 of its department stores, as well as at two Saks Fifth Avenue and 13 Saks Off Fifth locations. The six stores not currently undergoing clearance were carved out in hopes of salvaging potential value through future sales or partnerships.
Court documents revealed that unexpected foot traffic and sales in early March allowed Hudson’s Bay to repay its initial debtor-in-possession (DIP) financing of about $16 million, avoiding the need for a second round of emergency borrowing.
Path Forward Hinges on Buyer Interest
The April 7 deadline is not necessarily final. If Hudson’s Bay can show that one or more of the six locations are receiving qualified bids or have realistic turnaround potential, the monitor overseeing the restructuring and the financial advisor managing the sales process may allow them to remain in operation.
“If the RSA is approved, it provides a clear path forward with fewer fights,” said Taylor, referring to a proposed framework that would let Hudson’s Bay continue operating the six stores—if it sticks to a strict budget and meets lender expectations.
The agreement, however, does allow for flexibility: the company could remove stores from liquidation if a qualified bid comes forward.
Landlords Push Back: RioCan Speaks Out
Landlords, including major players like RioCan REIT, have voiced opposition to the RSA. RioCan’s lawyer, Joseph Pasquariello, argued the deal disproportionately favours senior lenders and undermines the broader goal of restructuring.
“These agreements are snatching the steering wheel from the company and driving it toward a liquidation result that RioCan and others are submitting should be avoided at any cost,” said Pasquariello in court.
RioCan is particularly involved, as it both leases space to Hudson’s Bay and co-owns certain retail properties through joint ventures.
Retail Expert: Competing Interests and Deep Challenges
Retail strategist Carl Boutet, who has been monitoring the situation closely, noted in an interview that the RSA presents a balancing act.
“There’s a lot of back and forth between Pathlight and RioCan about this RSA,” Boutet said. “But the RSA allows the six stores to keep operating—so far—so long as it’s within their budgets.”
Boutet emphasized that the lenders are pushing for resolution because even the most optimistic recovery scenario would still fall short of fully repaying senior debt. “They’re already projecting a $9 million shortfall just to repay the first-ranked lenders,” he explained.
Boutet added that other stakeholders, such as landlords and suppliers, may receive little or nothing if the lenders’ priority claims aren’t satisfied. “If the first-lien debt holders don’t get paid, then there’s no hope for employees, severance, or suppliers.”
Concerns Around Employee Protections and Governance
Employee representation groups have raised alarms about unpaid benefit contributions and deductions, as well as the fate of long-term disability recipients. Some employees are also losing access to legal representation that had been paid for through the liquidation process.
A separate issue gaining attention is a proposed $3 million Key Employee Retention Plan (KERP) to keep essential staff, including store managers, in place throughout the liquidation.
“Shutting down a business is not easy work,” said Boutet. “That money is there to incentivize people to stay on the Titanic a little longer.”
However, a more controversial element is a proposed $50 million director liability shield. “That part upsets me way more,” Boutet said. “Especially when it comes to someone like Richard Baker, who’s made hundreds of millions over the years running this thing into the ground.”
A White Knight Unlikely: Optimism in Short Supply
As for the six remaining stores, including the historic downtown Toronto and Montreal flagships, Boutet remains sceptical that a deal can be struck in time.
“Unless a white knight shows up from the heavens to repurchase Rupert’s Land,” he joked, referencing Hudson’s Bay’s colonial-era land holdings, “those six stores are likely headed to liquidation, too.”
The sentiment reflects growing consensus among retail experts and creditors: while the past few weeks have been chaotic and full of legal wrangling, a swift resolution appears increasingly necessary.
Next Steps: April 7 and Beyond
The restructuring process is ongoing, with a sale process for parts of the business set to conclude by late April, and the monetization of leases expected to finish in early May. The six-store carve-out remains the only sliver of potential for Hudson’s Bay to emerge from the process with a functioning retail footprint.
But as lender pressure mounts and costs continue to rise, time is running out.
“From what we’re hearing,” said Boutet, “even two more weeks might not be enough. And frankly, they should’ve started looking for solutions a long time ago.”
I am actually so sad to see this happening to some of the best stores. Hudson’s Bay has been around since before Canada officially became a country. I hate to see this happen to all the great stores, like Sears, Nordstrom, Eaton’s and now Hudson’s Bay. Hudson’s Bay has some amazing clothing, jewellery, shoes, perfumes, handbags, etc. Their styles and fashions are very nice and of great quality. Yes, they may get a bit pricey but a lot of the pieces are designer, stylish and of great quality. They often have amazing deals too, like 65% off or more and you can buy some incredible designer pieces for a hundred bucks. I bought a gorgeous ring from them that was super pricey originally but was on 65% off sale for LESS than a thousand dollars and it was worth every dime. Bought some nice leather boots from them as well, other shoes, purses, perfumes, etc. and the quality is always amazing. I also love the vibe the Hudson’s Bay stores provide. It is sad to see so many department stores closing, we barely have any left over. What are we gonna be left with? Expensive as hell stores that want to sell you boring beige, grey, or brown clothes with boring styles? I don’t understand how some of those stores that sell a basic white t-shirt for 300 bucks can stick around just fine but a good quality store is struggling. Honestly. People these days are poor, have no sense of style, and/or a combination of both. Hudson’s Bay should be saved. It is a part of History. I will actually be very upset to see it go. Soon we will have to go dumpster diving to find new clothes as all stores seem to be closing these days. But I really hope this won’t be the case for one of the few great stores left in Canada.