Proposal that would hand control to lenders lacked transparency and balance, judge says
A judge has dismissed Hudson’s Bay’s proposed restructuring deal, a decision that could have ripple effects for mortgage lenders, landlords, and commercial real estate stakeholders navigating the fallout from one of Canada’s largest retail insolvencies.
Ontario Superior Court Justice Peter Osborne ruled Saturday that a proposed restructuring agreement, backed by senior secured lenders, was “neither necessary nor appropriate at this time,” and raised concerns about transparency, lender overreach, and the protection of other stakeholders involved in the creditor protection process.
The rejected proposal would have granted Hudson’s Bay until April to finalize a rescue plan while handing greater operational control to its senior lenders.
Osborne noted that the company’s budget was not submitted to the court or other parties and said the agreement would have extended sweeping rights to lenders “to the exclusion of other stakeholders.” He emphasized that the existing court-appointed monitor was sufficient to oversee the creditor protection process without shifting power disproportionately to secured creditors.
Hudson’s Bay admitted on March 7 that it had begun deferring payments to landlords and suppliers amid severe financial distress. The company is now in the process of liquidating all but six of its 96 stores across the Hudson’s Bay, Saks Off Fifth, and Saks Fifth Avenue banners—with some flexibility to modify which locations remain open.
The rejected agreement had been backed by senior secured lenders, including Bank of America, Restore Capital, and Pathlight Capital. If approved, it would have required lender approval for any sale of the business and imposed weekly financial reporting, raising concerns that lenders would steer the company toward liquidation rather than a viable restructuring.
It was widely seen as a last-ditch attempt to prevent lenders from requesting receivership, a process where a court-appointed third party assumes control of a company’s assets to repay debts.
Hudson’s Bay supported the proposal, though its lawyer, Ashley Taylor, acknowledged in court Wednesday that the agreement “lacked the time, number of stores and latitude Hudson’s Bay would have preferred.”
“It was not a very satisfying outcome,” Taylor said.
RioCan Real Estate Investment Trust, which co-owns properties with Hudson’s Bay, called the retailer’s initial filing for creditor protection “disappointing” and criticized its attempt to halt lease payments.
“It is essential that any restructuring steps are on fair and balanced terms,” RioCan said.
David Bish, a lawyer representing Cadillac Fairview, another major landlord with 16 Hudson’s Bay stores, warned that approving the agreement would place the company’s future in the hands of creditors.
“They aren’t incentivized to restructure. They are incentivized to liquidate,” Bish said.
Read more: Hudson's Bay shutdown leaves landlords scrambling for solutions
In court Thursday, Restore Capital’s lawyer Linc Rogers pushed back.
“We are asking for protection. We are not asking for a reward,” he said. Rogers emphasized that the lenders were trying to avoid a court battle. “We don’t want to fight. We don’t want to bring a receivership application.”
To ease concerns, Rogers even offered to amend the deal and provide Hudson’s Bay with more time to avoid liquidating the six remaining stores.
“We are not looking to pick fights,” he said. “We are looking to resolve issues.”
Opposing landlords instead favoured allowing Hudson’s Bay to proceed with an existing court-supervised sales process, which involves seeking bids for the company or its assets. Many believe this process offers a more neutral path forward without ceding too much control to creditors.
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