Ontario Superior Court of Justice – Commercial List

Court File No.: CV-25-00738613-00CL
Date: 2025-03-19

In the Matter of the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended
And in the Matter of a Plan of Compromise or Arrangement of Hudson’s Bay Company ULC, Compagnie de la Baie d’Hudson SRI, HBC Canada Parent Holdings Inc., HBC Canada Parent Holdings 2 Inc., HBC Bay Holdings I Inc., HBC Bay Holdings II ULC, The Bay Holdings ULC, HBC Centerpoint GP Inc., HBC YSS 1 LP Inc., HBC YSS 2 LP Inc., HBC Holdings GP Inc., Snospmis Limited, 2472596 Ontario Inc., and 2472598 Ontario Inc., Applicants

Before: Peter J. Osborne

Appearances

For the Applicants:
Ashley Taylor, Elizabeth Pillon, Maria Konyukhova, Britnney Ketwaroo, Philip Yang, Nick Avis

For Cadillac Fairview:
Davis Bish

For Bank of America:
Evan Cobb

For Restore Capital LLC:
Linc Rogers, Caitlin McIntyre

For EY in the Receivership of Woodbine Mall Holdings Inc.:
Chad Kopach

For TK Elevator (Canada) Ltd.:
Lou Brzezinski, Alexandra Teodorescu, Nadav Amar

For Cominar Real Estate Investment Trust & Chanel ULC:
Haddon Murray

For KingSett Capital Inc.:
Andrew Winton, Annecy Pang

For the Court-appointed Monitor:
Sean Zweig, Michael Shakra, Thomas Gray

For Bank of Montreal and Desjardins Financial Security Life Assurance Company:
Trevor Courtis, Heather Meredith

For Restore Capital LLC and Bank of America:
Gilles Benchaya, Mandy Wu

For Ivanhoe Cambridge Inc.:
James D. Bunting

For RioCan Real Estate Investment Trust:
Robert J. Chadwick, Joseph Pasquariello, Andrew Harmes

For B.H. Multi Com Corporation, B.H. Multi Color Corporation & Richline Group Canada Inc.:
Tushara Weerasooriya, Jeffrey Levine, Guneev Bhinder

US Counsel for File Agent (Restore Capital LLC) as DIP Lender:
Gregg Galardi

For LVMH Moet Hennessy Louis Vuitton SA:
Isaac Belland

For the DIP Lenders:
Jake Harris

For the Trustees of the Congregation of Knox’s Church, Toronto:
Matthew Cressatti

For Oxford Properties Group, OMERS Realty Management Corporation, Yorkdale Shopping Centre Holdings Inc., Scarborough Town Centre Holdings Inc., Montez Hillcrest Inc., Hillcrest Holdings Inc., Kingsway Garden Holdings Inc., Oxford Properties Retail Holdings Inc., Oxford Properties Retail Holdings II Inc., OMERS Realty Corporation, Oxford Properties Retail Limited Partnership, CPPIB Upper Canada Mall Inc., CPP Investment Board Real Estate Holdings Inc.:
D.J. Miller, Andrew Nesbitt

For Toronto-Dominion Bank:
Calvin Horsten

For Nike Retail Services Inc. and PVH Canada Inc.:
George Benchetrit

For Ivanhoe Cambridge II Inc./Jones Lang LaSalle Incorporation, Morguard Investments Limited and Salthill Property Managements Inc.:
Linda Galessiere

For Ferragamo Canada Inc.:
Steven Weitz, Dilina Lallani

For Bentall Green Oak, Primaris REIT, Quadreal Property Group:
David Ullman, Brendan Jones

For 100 Metropolitan Portfolio, Mantella & Sons:
David Preger, Stephen Posen

For the Proposed Liquidator:
Shayne Kukulowicz, Monique Sassi

For certain HBC Employees and Retirees:
Andrew J. Hatnay, Robert Drake, Abir Shamim

For The Financial Services Regulatory Authority of Ontario:
Ken Rosenberg, Max Starnino, Emily Lawrence, Evan Snyder

For Investment Management Corporation of Ontario:
Sam Rogers

For the Department of Justice (Canada):
Kelly Smith Wayland

For UNIFOR Local 240:
Jodi Nesbitt

Heard: March 19, 2025

Endorsement

Peter J. Osborne

1. This is further to my Endorsement made in this matter on March 17, 2025, and further to the continuation of the comeback hearing yesterday, March 19, 2025.

2. Counsel for the Applicants advised the Court that good faith discussions between the Applicants on the one hand, and creditors, landlords and other stakeholders on the other hand, were continuing as facilitated by the Court-appointed Monitor.

3. Counsel advised that the parties were attempting to resolve a number of the matters that were contested at the hearing earlier this week related to the scope of relief sought by the Applicants at the comeback hearing. As a result, the Applicants requested, with the concurrence and support of other parties and with the recommendation of the Monitor, a further brief adjournment of this matter to conclude those discussions.

4. The Service List has been served. No party opposes the request, and several parties actively support it.

5. Defined terms in this Endorsement have the meaning given to them in my earlier Endorsements made in this proceeding or the motion materials unless otherwise stated.

6. In the circumstances, I am prepared to grant a brief adjournment. As indicated in Court at the conclusion of the hearing today, this matter will be continued on Friday, March 21, 2025 at 10:00 AM at the Courthouse.

7. As with earlier hearings in this matter, and with a view to maximizing accessibility and minimizing cost, those parties unable to attend in person at the courthouse tomorrow may attend remotely via Zoom link (the same Zoom link used for the hearing yesterday).

8. The continuation of the stay of proceedings and the balance of the relief sought on the motions summarized above will be addressed at that time.

9. In the interim, the Applicants request certain relief by way of amendments to the Initial Order. All of the relief sought is included in the prayer for relief in the Notice of Motion of the Applicants returnable March 17, 2025, supported by the Affidavit of Jennifer Bewley sworn March 14, 2025 (the “Second Bewley Affidavit”) on which the Applicants rely, and is fully described in the First Report of the Monitor dated March 16, 2025.

10. This relief is also unopposed by any party, supported by many stakeholders and recommended by the Monitor.

11. First, the stay of proceedings is extended to and including March 21, 2025 or such later date as this Court may order, pursuant to sections 11.02(2) and (3) of the CCAA. The present circumstances are such that the proposed extension is appropriate. I am satisfied that the Applicants have acted and continue to act in good faith and with due diligence. The Applicants and the Monitor confirm that the Company has sufficient liquidity to fund operations through the proposed stay extension period.

12. Second, the quantum of the Directors’ Charge is increased to $49,200,000 pursuant to sections 11.51 and 11.52 of the CCAA. While this amount is significant, it reflects, to a very large extent, the business of the Applicants as a major national retailer with the attendant HST remittance obligations, as well as payroll deduction remittance obligations in respect of the approximately 9,400 employees, and the maximum potential exposure related thereto. The Monitor supports the proposed increase and the quantum.

13. Third, the relative priorities of the Administration Charge, the Directors’ Charge and the DIP Charge as established in the Initial Order at para. 40, are amended, such that they shall be as follows:

a. With respect to Property other than the Loan Parties’ Property, the Administration Charge shall rank first to a maximum amount of $2,800,000, and the Directors’ Charge shall rank second to a maximum amount of $49,200,000; and

b. With respect to the Loan Parties’ Property, subject in all cases to the Priority Waterfall (as defined in the DIP Term Sheet), as amongst themselves, the priorities of the Charges shall be as follows:

Priority Ranking	ABL Priority Collateral	Pathlight Priority Collateral	Other Collateral (as defined in the DIP Agreement)
1st	Administration Charge (to the maximum amount of $2,800,000).	Administration Charge (to the maximum amount of $2,800,000).	Administration Charge (to the maximum amount of $2,800,000).
2nd	All amounts owing under the Revolving Credit Facility and FILO Credit Facility (other than Excess ABL Obligations).	All amounts owing under the Pathlight Credit Facility (other than Excess Term Loan Obligations).	Directors’ Charge (to the maximum amount of $13,500,000).
3rd	Directors’ Charge (to the maximum amount of $13,500,000).	All amounts owing under the Revolving Credit Facility and FILO Credit Facility (other than Excess ABL Obligations).	DIP Lenders’ Charge.
4th	DIP Lenders’ Charge.	Directors’ Charge (to the maximum amount of $13,500,000).	Directors’ Charge (to the maximum amount of $35,700,000).
5th	Directors’ Charge (to the maximum amount of $35,700,000).	DIP Lenders’ Charge.
6th	Term Loan Obligations (other than Excess Term Loan Obligations).	Directors’ Charge (to the maximum amount of $35,700,000).

14. Third, the proposed engagement of Reflect Advisors, LLC (“Reflect”) as financial advisor to Hudson’s Bay, according to the terms of the proposed Reflect Engagement Agreement, is approved, and the Applicants are authorized to enter into and perform that Agreement. Paragraph 31 of the Initial Order is amended to include Reflect within the existing Administration Charge as a beneficiary thereof.

15. The Court has the discretion pursuant to section 11 of the CCAA to permit debtor companies to enter into arrangements to facilitate a restructuring. Such arrangements may include the retention of expert advisors where necessary to assist with restructuring efforts: Victorian Order of Nurses for Canada (Re), 2015 ONSC 7371, para 27.

16. Such agreements are often approved in the context of CCAA proceedings, where the Court is satisfied that such is appropriate, upon consideration of the following factors, among others:

a. whether the debtor and the court officer overseeing the proceedings believe that the quantum in nature of the remuneration are fair and reasonable;

b. whether the financial advisor has industry experience and/or familiarity with the business of the debtor;

c. whether any proposed success fee is necessary to incentivize the financial advisor; and

d. the complexity of the debtor’s business, and whether that complicates any monetization or restructuring efforts.

See: Just Energy Corp., Re, 2021 ONSC 1793, para 113; Danier Leather Inc. Re, 2016 ONSC 1044, para 47, citing Sino-Forest Corporation (Re), 2012 ONSC 2063, paras 46-47; and Colossus Minerals Inc (Re), 2014 ONSC 514, paras 30-36.

17. Courts have considered similar factors when determining whether to grant a charge to secure the fees of a financial advisor: Payless ShoeSource Canada Inc and Payless ShoeSource Canada GP Inc (Re), 2019 ONSC 1215, paras 30-33; and Target Canada Co., Re, 2015 ONSC 303, paras 72-75.

18. Here, the Monitor supports the engagement of Reflect and its inclusion as a beneficiary in the Administration Charge. There will be no increase to the quantum of that Charge as a result thereof.

19. Reflect has worked extensively with the Company since its engagement in February 2025 and has been involved in the consideration of strategic alternatives and restructuring options and the development of pro forma financial models.

20. I note that, as set out at paras. 86-90 of the Second Bewley Affidavit and Exhibit “F” thereto (being an unredacted copy of the Reflect Engagement Letter), the proposed Reflect Engagement Letter includes a monthly flat fee for the first two months and hourly fees thereafter, but Reflect does not earn any success fees or other fees contingent on certain milestones being achieved in any restructuring.

21. I am satisfied that, in the challenging and rapidly evolving circumstances of this case, its work will be accretive to the efforts of the Applicants, and that the above-noted factors are satisfied here.

22. For all of these reasons, the relief sought today is granted.

23. Order to go in the form signed by me which has immediate effect without the necessity of issuing and entering.

Peter J. Osborne