Hudson’s Bay Company, Re, 2025 ONSC 1897

Court File No.: CV-25-00738613-00CL
Date: 2025-03-26
Ontario Superior Court of Justice – Commercial List

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

Counsel:
Ashley Taylor, Elizabeth Pillon, Maria Konyukhova, Britnney Ketwaroo, Philip Yang, and Nick Avis, for the Applicants
Davis Bish, for Cadillac Fairview
Evan Cobb, for Bank of America
Linc Rogers and Caitlin McIntyre, for Restore Capital LLC
Chad Kopach, for EY in the Receivership of Woodbine Mall Holdings Inc.
Lou Brzezinski, Alexandra Teodorescu and Nadav Amar, for TK Elevator (Canada) Ltd.
Haddon Murray, for Cominar Real Estate Investment Trust & Chanel ULC
Matthew Gottlieb, Andrew Winton and Annecy Pang, for KingSett Capital Inc.
Sean Zweig, Michael Shakra and Thomas Gray, for the Court-appointed Monitor
Trevor Courtis and Heather Meredith, for Bank of Montreal and Desjardins Financial Security Life Assurance Company
Gilles Benchaya and Mandy Wu, for Restore Capital LLC and Bank of America
James D. Bunting, for Ivanhoe Cambridge Inc.
Robert J. Chadwick, Joseph Pasquariello and Andrew Harmes, for RioCan Real Estate Investment Trust
Tushara Weerasooriya, Jeffrey Levine and Guneev Bhinder, for B.H. Multi Com Corporation, B.H. Multi Color Corporation & Richline Group Canada Inc.
Gregg Galardi, US Counsel for File Agent (Restore Capital LLC) as DIP Lender
Isaac Belland, for LVMH Moet Hennessy Louis Vuitton SA
Jake Harris, for the DIP Lenders
Matthew Cressatti, for the Trustees of the Congregation of Knox’s Church, Toronto
D.J. Miller and Andrew Nesbitt, 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.
Calvin Horsten, for Toronto-Dominion Bank
Stuart Brotman and Jennifer L. Caruso, for Royal Bank of Canada
George Benchetrit, for Nike Retail Services Inc. and PVH Canada Inc.
Linda Galessiere, for Ivanhoe Cambridge II Inc./Jones Lang LaSalle Incorporation, Morguard Investments Limited and Salthill Property Managements Inc.
Steven Weisz and Dilina Lallani, for Ferragamo Canada Inc.
David Ullman and Brendan Jones, for Bentall Green Oak, Primaris REIT, Quadreal Property Group
David Preger and Stephen Posen, for 100 Metropolitan Portfolio, Mantella & Sons
Shayne Kukulowicz and Monique Sassi, for the Proposed Liquidator
Andrew J. Hatnay, Robert Drake and Abir Shamim, for certain HBC Employees and Retirees
Ken Rosenberg, Max Starnino, Emily Lawrence and Evan Snyder, for The Financial Services Regulatory Authority of Ontario
Sam Rogers, for Investment Management Corporation of Ontario
Kelly Smith Wayland, for the Department of Justice (Canada)
Blake Scott, for UNIFOR Local 240 & 40
Howard Manis, for Villeroy & Boch Tableware Ltd.
Mitch Koczerginski, for Cherry Lane Shopping Centre Holdings Inc. and TBC Nominee Inc.
Lindsay Miller, for West Edmonton Mall Property
Yiwei Jin, for United Food & Commercial Workers, Int’l Union Local 1006A
David Rosenblat, for Pathlight
Pavle Masic, for Samsonite Canada
Sarah Pinsonnault, for Québec Revenue Agency

Heard: March 21, 2025

Endorsement

Introduction

1. Last Friday, March 21, 2025, I granted certain relief at the conclusion of the hearing in this matter with reasons to follow. These are those reasons.

2. On March 7, 2025, I granted an Initial Order in this Application with Reasons released on March 10, 2025. At the comeback hearing on March 17, 2025, I extended the stay of proceedings (and granted other interim relief) in effect until March 19, 2025 and adjourned the motion for the balance of the relief sought by the Applicants. The adjournment was to afford the parties, with the assistance and facilitation of the Court-appointed Monitor, an opportunity to continue discussions that were ongoing prior to and indeed during the comeback hearing, with a view to narrowing or resolving certain contested issues.

3. On March 19, 2025, and for the reasons set out in the Endorsement of that date, I approved the engagement of a financial advisor for the Applicants, increased the quantum of the Directors’ Charge, and granted other interim relief. I adjourned the motion for the balance of the relief sought by the Applicants until March 21 at their request, with the recommendation of the Monitor, and without opposition.

4. Upon resumption of the comeback hearing on March 21, the parties advised that many of the issues that were contested on March 17 had been resolved as among them. As such, much of the relief sought by the Applicants is now proceeding on a consent or unopposed basis. As further described below, certain relief is opposed.

5. In addition, circumstances continue to evolve quite literally by the hour. The reality is that since this insolvency proceeding and the challenges facing Hudson’s Bay have received significant media attention, sales of merchandise, and particularly Hudson’s Bay branded merchandise, have been robust over the last number of days.

6. The result is that the Company has earned significant revenue and has cash on hand that has exceeded forecasts, such that it no longer has the immediate need for liquidity during the next few weeks that had been projected in the cash flow forecast appended to the First Report of the Monitor. That forecast anticipated the surge in sales that is now being realized, although anticipated that such an increase in revenue would not be so immediate.

7. It was for that reason that the Applicants sought, and the Monitor supported, approval of a Debtor in Possession (“DIP”) Facility to provide liquidity that was urgently needed at the time. As reflected in the forecast, once sales increased in the expectation of a liquidation, revenues were projected to be sufficient to fund wind down operations in these proceedings through the proposed stay extension period.

8. As a result of all of the above, the proposed DIP Facility is no longer required and the Company seeks, among other things, authority to repay to the DIP Lender the outstanding balance on the DIP Facility of approximately $16 million that has been drawn down since the date of the Initial Order.

9. It further follows that a number of the highly contested issues related to the DIP Facility, about which submissions were made on March 17, have now been resolved or eliminated since they were related to terms and conditions of the proposed continued DIP Facility that is no longer necessary.

10. It is important to note that while an increase in retail sales revenues is of assistance, it should not be misinterpreted as an indication that the business is viable as a going concern. On the contrary, the only reason that there is net cash on hand is that the Company is not purchasing new inventory such as would be necessary to sustain retail operations in the usual course of business.

11. Moreover, the previously approved DIP Facility available for the initial stay period provided for access to borrowed funds up to a maximum of $16 million. As noted, $11 million has already been drawn down to fund operations during the initial stay period. The previously proposed DIP Facility to continue thereafter was in a maximum amount of $23 million, inclusive of the original $16 million, for a net increase of only $7 million in available borrowed funds.

12. That amount fell dramatically short of any realistic estimate of the funds needed to ensure a going-concern outcome for the Company. Put simply, the Company has not yet been able to identify any lender or investor prepared to advance anywhere near the amount required to put the Company on a solid footing to provide the basis for a going-concern restructuring. While the Company advises that it is still hopeful that a source of funds can be identified, none has emerged at this time.

13. As a further result of all of the above, the Company now seeks to proceed with a proposed liquidation sale as rapidly as possible since its liquidity challenges require immediate liquidation of inventory.

14. The Service List has been served and the materials are available on the website of the Court-appointed Monitor.

15. Defined terms in this Endorsement have the meaning given to them in my earlier Endorsements made in this proceeding, the Application materials, and/or the Reports of the Monitor, unless otherwise stated.

Orders Sought

16. Today, the Applicants seek four Orders:

i. a further Amended and Restated Initial Order (“ARIO”):

1. extending the stay of proceedings to and including May 15, 2025;
2. continuing the stay of proceedings of rights of third-party tenants of commercial shopping centres or other properties where premises operated by Hudson’s Bay are located;
3. authorizing the Company to repay the DIP Financing Obligations upon fulfilment of certain conditions, together with related relief;
4. approving the Restructuring Support Agreement;
5. amending the stay of the payment of rent from Hudson’s Bay to the HB-RioCan Joint Venture Entities (collectively, the “JV Entities”) and granting a priority charge in favour of the JV Entities to secure any rent not paid after March 7, 2025;
6. approving a Key Employee Retention Plan (“KERP”) and related charge; and
7. authorizing Hudson’s Bay to enter into a Financing Agreement with Imperial PFS Payments Canada, ULC to provide financing to the Company to purchase property insurance policies;

ii. a Liquidation Sale Approval Order approving the amended agreement between Hudson’s Bay and the Liquidation Consultant to provide for the Liquidation Sale of the Company’s inventory, fixtures and equipment; approving the Sale Guidelines; and authorizing the Company to undertake the Liquidation Sale;

iii. a Lease Monetization Order approving the Lease Monetization Process and authorizing the Applicants to undertake the monetization of their leases, including through the approval of a consulting agreement between Hudson’s Bay and Oberfeld Snowcap Inc. to assist in the marketing of the Company’s Leases; and

iv. a Sales and Investment Solicitation Process (“SISP”) Order approving the proposed SISP and authorizing the Applicants to commence that Process immediately.

[The Stay of Proceedings Should Be Extended](#the-stay-of-proceedings-should-be-extended)

17. Sections 11.02(2) and 11.02(3) of the CCAA provide that the Court may order a stay of proceedings for any period that the Court considers necessary, if the Court is satisfied that circumstances exist that make the order appropriate and the applicant has acted, and is acting, in good faith and with due diligence. I am so satisfied.

18. The activities of the Applicant, supported by the Monitor, are set out in the Second Bewley Affidavit, the Third Bewley Affidavit sworn March 21, 2025, the First Report of the Monitor and the Supplement to the First Report dated March 21, 2025.

19. A continued stay of proceedings is clearly necessary here to stabilize the activities and operations of the Applicants while the SISP, Lease Monetization and proposed Liquidation processes are underway. Such stabilization is necessary in order to maximize the chances of recovery for stakeholders.

20. The revised cash flow forecasts prepared by the Applicants in consultation with the Monitor reflect that the Applicants should have sufficient liquidity to fund operations and these proceedings through the proposed stay extension period.

21. The Monitor fully supports the proposed stay extension, and no party opposes the extension today.

22. Accordingly, the stay of proceedings is extended to and including May 15, 2025.

[JV Entity Rent Payments](#jv-entity-rent-payments)

23. As reflected in the Updated Cash Flow Forecast, the Company is expected to have sufficient liquidity to pay a monthly aggregate amount of $7 million plus applicable taxes to the JV Entities. Accordingly, the Applicants seek, with the consent and agreement of the JV Entities and the JV counterparty, RioCan, to modify the stay of proceedings with respect to the payment of rent owing to the JV Entities to permit the partial payments. They also seek approval of a corresponding JV Rent Charge to secure post-filing rent not paid by the Company to the JV Entities.

24. As described in my Initial Order Endorsement dated March 10, 2025, I extended the stay of proceedings for the 10-day period pending the comeback hearing to the defined Non-Applicant Stay Parties, including the RioCan-Hudson’s Bay JV, in part. The proportion of rent payable by the Applicants to the JV Entities that was payable to landlords under the Head Leases would continue to be paid. This relief was reviewable at the comeback hearing, at which time I would determine, with the benefit of submissions (if any) from RioCan, whether the stay of proceedings, even if continued generally, should continue to apply to the JV Entities.

25. At the commencement of the comeback hearing, the Applicants submitted that the partial stay of proceedings should continue to apply to the JV Entities, pursuant to the exercise of my discretion authorized in section 11 of the CCAA. The Applicants relied on the decision of this Court in Xplore, Inc. (Re), 2024 ONSC 4593, paras. 55-56, as a relevant example of circumstances in which the Court required certain suppliers to the debtor (in that case satellite providers) to continue supplying services to the debtor without being paid post-filing payments to which they were contractually entitled.

26. In that case, Kimmel, J. noted that section 11.01 of the CCAA does not specify that suppliers must be paid at the contractual rates post-filing. While the relief granted in that case applied to suppliers of satellite services, the Applicants here submitted that the rationale applies equally to landlords such as the JV Entities. They further submitted that even if the relief sought here was novel, it was, as observed by the Court in Xplore, at paras. 61-63, available “in appropriate circumstances within the framework and spirit of the applicable legislation.”

27. The Applicants further submitted that in Nordstrom Canada Retail Inc. (Re), this Court stayed and suspended the payment of certain post-filing amounts in respect of construction, fixturing and furnishing premises, which amounts would otherwise be due and payable under the sublease between the debtor as sublessee and the non-applicant stay parties as sublessor.

28. The Monitor supported the continuation of the stay of proceedings to the JV Entities, observing that “the stay would still require rent to be paid in full to third-party landlords, while staying ‘rent payments’ that the Monitor believes can be fairly characterized as financing arrangements” (First Report, para. 8.15).

29. Also, at the commencement of the comeback hearing, RioCan opposed the continuation of the partial stay to the JV Entities, and requested that the Court amend the Initial Order to require Hudson’s Bay to pay all post-filing occupancy rent to the JV Entities for use in occupation of leased or subleased premises on the same basis as all landlords providing space to Hudson’s Bay.

30. RioCan submitted that there was long-standing precedent for the proposition that post-filing rent should be paid to landlords providing leased premises to a debtor company. It further submitted that there was no reason for this Court to exercise its discretion to continue the partial stay on the basis that the counterparty to the Hudson’s Bay leases, in this case, the relevant JV Entities, were partially owned (in most cases, majority-owned) by Hudson’s Bay or related entities.

31. The structure of the joint venture is summarized in the Application materials, the First Report, and briefly in my Endorsement dated March 10 in respect of the Initial Order (para. 45). As described above, the stay of proceedings did not apply to that portion of the payments made by Hudson’s Bay to the JV Entities which was payable by the JV Entities to the relevant landlords. It applied only to that portion of the payments made by Hudson’s Bay to the JV Entities, which was retained by them and not paid over to the relevant landlords.

32. In any event, I need not determine the issue since the Applicants and RioCan have now reached an agreement, which is not opposed by any other party (including, for greater certainty, the JV Entities), and which is recommended by the Monitor.

33. Accordingly, it is not necessary for me to make a finding today as to whether the payments by Hudson’s Bay to the JV Entities are wholly in the nature of “rent” payable to a landlord or whether they include a “financing” component. I do observe that while the JV Entities (sub-landlords) are not wholly owned by the Company, neither are they complete strangers in the sense of being third party landlords. The JV is majority-owned by Hudson’s Bay to the extent of approximately 78%. The nature of the relationship between the parties and the precise terms of the contractual and other arrangements may be relevant to the analysis of whether and to what extent such payments are in the nature of rent for premises or not.

34. The agreement now reached by the parties contemplates that Hudson’s Bay will pay the monthly aggregate amount of $7 million plus applicable taxes in respect of the JV Rent. The Company has sufficient liquidity to do so. This amount is intended to approximate the rent payable under the head leases (already being paid even under the partial stay), together with monthly debt servicing requirements and administrative expenses incurred in the ordinary course and payable under the applicable Leases to which Hudson’s Bay is a party.

35. This monthly amount will be payable on the same terms as those applicable to all other Leases provided for in the ARIO, except that to the extent that any JV Lease is disclaimed or terminated, the JV monthly amount shall automatically be reduced by an amount equal to the pro rata amount attributable to such JV Lease relative to all other JV Leases, and there will be an adjustment for the period March 1, 2025 to and including March 7, 2025, the date of the Initial Order.

36. In addition, the agreement provides that any post-filing rent not paid by the Company to the JV Entities would be secured by a new JV Rent Charge in favour of the JV Entities. That JV Rent Charge would rank fourth in the waterfall that applies to Property other than the Loan Parties’ Property behind the Administration Charge in first position, the KERP Charge in second position, and the Directors’ Charge to the maximum amount of $13,500,000, with the balance of the quantum of the Directors’ Charge in the amount of $35,700,000 ranking behind the JV Rent Charge. The JV Rent Charge would rank fifth in the waterfall that applies to the Loan Parties’ Property, all as set out in the materials.

37. I am satisfied that this consensual resolution of the issue by the Applicants and the JV Entities, which is not opposed by the JV Lenders and is recommended by the Monitor, is appropriate in the circumstances of this case. The JV Rent Charge is limited to that which is necessary to cover unpaid amounts that would otherwise have been payable to the JV Entities in the ordinary course.

[Co-Tenancy Stay](#co-tenancy-stay)

38. The Applicants also request an order that the extended stay of proceedings would continue to apply to third party “co-tenants”. At the initial ex parte hearing of this Application on March 7, 2025, I was prepared to grant the co-tenancy stay for the initial 10-day period to maintain the status quo and stability for that short period of time. However, I specifically noted in my reasons for the Initial Order that I had concerns about the evidence in the record supporting such a stay, and that it would be addressed further at the comeback hearing. I stated in those reasons the following:

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[Proposed Path Forward: Three Concurrent Processes](#proposed-path-forward-three-concurrent-processes)

44. The Applicants seek the approval of three distinct processes to canvass the market for potential restructuring, refinancing or going-concern sale opportunities, each with a view to maximizing recovery for stakeholders in respect of available assets:

a. a Liquidation Sale for the liquidation of the Inventory and Furniture, Fixtures and Equipment (“FF&E”);

b. a Lease Monetization Process for the sale, transfer or assignment of Leases to third parties; and

c. a Sale and Investment Solicitation Process (“SISP”) to identify opportunities:

i. to sell all, substantially all, or certain portions of the property or business of the Non-Applicants State Parties or their Business; and/or

ii. for investment in, restructuring, recapitalization, refinancing or other form of reorganization of the Applicants and the Non-Applicant Stay Parties or their business.

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[The Liquidation Sale and Related Issues](#the-liquidation-sale-and-related-issues)

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[The Lease Monetization Process and Retainer of the Broker](#the-lease-monetization-process-and-retainer-of-the-broker)

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[The SISP](#the-sisp)

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[Financing Agreement – Property Insurance](#financing-agreement-property-insurance)

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[The KERP and Continued Sealing Order](#the-kerp-and-continued-sealing-order)

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[The Repayment of the DIP Facility](#the-repayment-of-the-dip-facility)

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[Restructuring Support Agreement](#restructuring-support-agreement)

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[Result and Disposition](#result-and-disposition)

120. For all of the above reasons, I signed the four orders, amended in accordance with the directions given by me at the conclusion of the hearing of these motions, and directed that the Court-appointed Monitor distribute them to the Service List immediately.

121. The orders have immediate effect without the necessity of issuing and entering.

Osborne J.

Note re: Corrections. On April 4, 2025, counsel drew to the attention of the Court four typographical errors contained in the Endorsement as released on March 26, 2025. Those have been corrected as follows. In paragraph 62, the reference to “the Pathlight Agent” has been corrected to refer to “the Agents”. In the Footnote to paragraph 67, the language has been corrected to reflect the updated agreement among the parties as to the reservation of rights. In paragraph 80, the timelines have been corrected to refer to April 30 and May 16, respectively, rather than April 15 and April 29. In paragraph 119, the reference to the next hearing has been corrected to refer to March 26, rather than September 26. No other changes, additions or deletions have been made.

Osborne J. 4/4/25.

Footnotes

[1] See, for example, Danier Leather Inc (Re), 2016 ONSC 1044 at paras. 10, 27 [Danier]; Payless ShoeSource Canada Inc and Payless ShoeSource Canada GP Inc, 2019 ONSC 1305 at para. 9; Comark Holdings Inc (Re), (January 21, 2025), Ont SCJ [Commercial List], Court File No CV-25-00734339-00CL (Endorsement of Justice Cavanagh) at para. 7 [Comark Endorsement], endorsing Comark Holdings Inc (Re), (January 17, 2025), Ont SCJ [Commercial List], Court File No CV-25-00734339-00CL (Realization Process Approval Order) [Comark Order]; Ted Baker Canada Inc et al v Yorkdale Shopping Centre Holdings Inc, (May 3, 2024), Ont SCJ [Commercial List], Court File No CV-24-00718993-00CL (Endorsement of Justice Black) at paras. 13−17 [Ted Baker Endorsement], endorsing Ted Baker Canada Inc et al v Yorkdale Shopping Centre Holdings Inc (Re), (May 3, 2024), Ont SCJ [Commercial List], Court File No CV-24-00718993-00CL (Realization Process Approval Order) [Ted Baker Order]; Mastermind GP Inc (Re), (November 30 2023), Ont SCJ [Commercial List], Court File No CV-23-00710259-00CL (Endorsement of Justice Steele) at paras. 10−18 [Mastermind Toys Endorsement], endorsing Mastermind GP Inc (Re), (November 30 2023), Ont SCJ [Commercial List], Court File No CV-23-00710259-00CL (Realization Sale Approval Order) [Mastermind Order]; Nordstrom Canada Retail Inc (Re), 2023 ONSC 1814 at paras. 6−13 [Nordstrom Endorsement], endorsing Nordstrom Canada Retail Inc (Re), (March 20, 2023), Ont SCJ [Commercial List], Court File No CV-23-0069561900CL (Liquidation Sale Approval Order) [Nordstrom Order]; Bed Bath & Beyond Canada Ltd (Re), 2023 ONSC 1230 at paras. 7−9 [BBB Endorsement], endorsing Bed Bath & Beyond Canada Ltd (Re), (February 21, 2023), Ont SCJ [Commercial List], Court File No CV-23-00694493-00CL (Sale Approval Order) [BBB Order]; Sears Canada Inc (Re), (July 18, 2017), Ont SCJ [Commercial List], Court File No CV-17-11846-00CL (Liquidation Sale Approval Order); Target Canada Co (Re), 2015 ONSC 846 at paras. 2−5 [Target Endorsement], endorsing Target Canada Co (Re), (February 4, 2015), Ont SCJ [Commercial List], Court File No CV-15-10832-00CL (Approval Order – Agency Agreement).

[2] See Danier, at para. 23, citing Nortel Networks Corp (Re) at para. 49 [Nortel].

[3] Comark Endorsement, at para. 6; Ted Baker Endorsement, at para. 14.

[4] I observed above that no party opposed the Lease Monetization Process. The Landlords, acting cooperatively and generally in unison (as is expected on the Commercial List, absent good reason not to), do not oppose the Process, but requested that this Endorsement reflect that “nothing contained in any of the Orders issued today as it relates to any of the Leases involving the JVs purports to determine the issue of the Applicants’ rights to do anything other than conduct the liquidation sale on the premises in accordance with the liquidation sale guidelines and corresponding Order (which is not opposed by the relevant landlords for that narrow purpose only). The marketing of the Leases pursuant to the Lease Monetization Process will be without prejudice to the complete reservation of rights to all parties on the issue of the ability of the Applicants to transact in respect of leases to which the Applicants are not parties.” As I advised the parties at the conclusion of the hearing of these motions, this language is agreeable, save for the last sentence. To be clear, the reservation of rights about the ultimate sale of Leases is clear, but it is equally clear that the marketing process will commence immediately as described above.