A critical court hearing on Monday, March 17, could determine the fate of Hudson’s Bay Company (HBC) in its ongoing restructuring under the Companies’ Creditors Arrangement Act (CCAA). At the center of the legal battle is a motion filed by RioCan Real Estate Investment Trust, one of HBC’s largest landlords and a key joint venture (JV) partner, demanding that the retailer resume paying rent on a dozen properties across Canada.
RioCan, which co-owns 12 retail properties with HBC through a joint venture, has taken legal action to overturn an earlier court order that allowed HBC to suspend rent payments to these JV properties while still occupying them. The real estate giant argues that this decision is unprecedented in Canadian insolvency proceedings and puts RioCan’s financial stability at risk.
HBC, which filed for CCAA protection on March 7, 2025, is still paying rent on 84 other leased locations, but under the court-approved restructuring terms, it has exempted itself from rent obligations on the JV properties. RioCan asserts that this selective rent suspension violates CCAA principles, as companies under protection are typically required to continue paying for the use of leased properties.
RioCan’s Legal Argument
In its motion record, filed on March 14, 2025, RioCan is seeking an order from the Ontario Superior Court of Justice (Commercial List) that would:
- Require HBC to resume rent payments to the JV properties immediately.
- Strike down the rent suspension provision in the original CCAA order.
- Prevent HBC from securing debtor-in-possession (DIP) financing if it includes restrictions on paying JV rent obligations.
RioCan CFO Dennis Blasutti, in an affidavit supporting the motion, emphasized that HBC owes approximately $10 million per month in rent to the JV entities. Roughly 70% of these payments go toward covering property-related expenses such as mortgages, operating costs, and administrative fees, while the remaining 30% is distributed to JV partners, including RioCan and HBC’s own real estate arm.
Potential Court Outcomes
Monday’s court hearing could result in several possible outcomes:
- Full Victory for RioCan – The court orders HBC to resume full rent payments immediately, preventing financial strain on the JV and ensuring that all landlords are treated equally under the CCAA.
- Partial Compromise – The judge may allow HBC to pay only a portion of the rent, covering operating costs while deferring landlord distributions until a later stage in the restructuring.
- HBC Prevails – The court upholds the rent suspension, meaning RioCan and its JV entities would be left to cover financial shortfalls, potentially forcing loan defaults on some properties.
- DIP Financing Adjustments – The judge could modify HBC’s DIP financing agreement, ensuring that funds are available for JV rent payments.
Potential Impact on Hudson’s Bay Stores
The outcome of this court hearing could significantly impact the future of the Hudson’s Bay department store chain. Depending on the court’s ruling, several scenarios could unfold:
- If the Court Orders Full Rent Payments – HBC would be required to resume rent payments on the JV properties, adding approximately $10 million per month in financial obligations. This could force the company to accelerate store closures, particularly in underperforming locations, and may lead to liquidation proceedings if it cannot secure additional financing.
- If the Court Grants Partial Compromise – HBC may receive temporary relief, allowing it to defer portions of its rent payments. While this would ease immediate financial strain, it could still result in selective store closures or negotiations with landlords to exit unprofitable leases.
- If the Court Upholds the Rent Suspension – HBC would gain a significant financial advantage by avoiding rent payments on the JV properties while continuing operations. This scenario would extend the retailer’s runway for restructuring, potentially allowing it to focus on e-commerce expansion and store format changes. However, RioCan and other landlords could retaliate, pushing for alternative legal remedies or accelerating foreclosure actions on properties.
- If DIP Financing is Modified – If the court mandates changes to the debtor-in-possession (DIP) financing, ensuring that rent is included in funding obligations, HBC could be forced to prioritize payments to landlords over other restructuring initiatives. This could impact the retailer’s ability to invest in store renovations, technology, and inventory replenishment.
The decision could determine whether HBC survives as a department store operator or faces an expedited path toward liquidation or asset sales. Store closures, layoffs, and shifts toward a smaller store footprint may all be on the horizon, depending on how the legal proceedings unfold.
How RioCan Could Push HBC Toward Liquidation
The legal action taken by RioCan has the potential to accelerate the downfall of Hudson’s Bay, depending on how the court rules. Several scenarios could force HBC into a rapid restructuring or outright liquidation:
- Court Orders Full Rent Payments – If HBC is required to resume full rent payments to the JV properties, this additional $10 million per month obligation could drain its remaining cash flow. If HBC fails to secure new financing, it may be forced into store closures, mass layoffs, or even bankruptcy liquidation.
- Eviction from JV Properties – If HBC does not comply with court-ordered payments, RioCan could push for eviction or foreclosure on the JV properties. Losing key downtown locations in Vancouver, Montreal, Calgary, and Ottawa would cripple operations, making it harder for HBC to sustain its brand.
- JV Defaults on Mortgages – If RioCan and its JV partners cannot cover property-specific mortgages due to HBC’s non-payment, lenders could foreclose on properties or demand immediate repayment, further jeopardizing HBC’s access to key locations.
- Legal Retaliation from Other Landlords – If RioCan’s case succeeds, other landlords may follow suit, pressuring HBC into negotiating rent obligations or liquidating more assets to stay afloat.
The combination of these pressures could force HBC into a more aggressive restructuring, asset sell-offs, or a complete liquidation.
Details of the 12 Properties in Dispute
The properties at the center of this legal dispute include a mix of head lease properties, wholly-owned properties, and co-owned properties between RioCan and HBC. These properties are vital to HBC’s retail operations and represent a significant portion of RioCan’s real estate holdings.
1. Head Lease Properties (Leased from Third-Party Landlords)
These properties are leased by the JV entities and subleased to HBC:
- CF Carrefour Laval (Laval, QC)
- Promenades St. Bruno (St. Bruno, QC)
- Yorkdale Shopping Centre (North York, ON)
- Scarborough Town Centre (Scarborough, ON)
- Square One (Mississauga, ON)
2. Freehold Properties (Owned by the JV)
These properties are 100% owned by the JV, with HBC as a tenant:
- Downtown Vancouver (Vancouver, BC)
- Downtown Calgary (Calgary, AB)
- Downtown Montreal (Montreal, QC)
- Downtown Ottawa (Ottawa, ON – Beneficial interest held by Ottawa LP)
- Devonshire Mall (Windsor, ON)
3. Co-Owned Properties (50% Ownership by RioCan and the JV)
These two mall locations are co-owned by RioCan and the JV, with HBC as the tenant:
- Oakville Place (Oakville, ON)
- Georgian Mall (Barrie, ON)
Broader Implications for Canadian Retail and Real Estate
The outcome of this case could have far-reaching consequences for landlords, creditors, and the broader retail sector. If the court permits rent suspension, it could set a precedent where CCAA debtors strategically avoid payments to certain landlords while maintaining control of key properties. Conversely, if the court requires full rent payments, it could place additional financial pressure on HBC, accelerating liquidation scenarios.
The March 17 hearing will provide clarity on whether HBC can continue operating under its current rent deferral strategy or if it will be forced to allocate more funds toward its landlords. RioCan has also indicated that it is open to an alternative DIP financing structure that would ensure rent payments continue.
