HBC’s restructuring plan opposed by employees, RioCan

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Hudson’s Bay Co. ULC workers and a key real estate partner have opposed a restructuring agreement that Canada’s oldest departmental store wants to get approved by an Ontario court.

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One of the conditions of the agreement with its senior lenders says that the six Bay stores currently not being liquidated would be added to the liquidation process if HBC can’t provide a “firm commitment” to pay back its lenders by early April.

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The agreement also prevents “the future appointment of employee and retiree representative counsel,” lawyers representing some HBC workers said in a court filing on March 26.

Lawyers representing some workers say the move would be detrimental for most HBC employees who won’t be receiving a severance package and may also not be eligible to receive government support.

“There will be a strong need for a representative counsel to be appointed for the employees and retirees,” Koskie Minsky LLP lawyers said in the filing. “The (agreement), with its vice-like grip on what HBC can do in these proceedings, preemptively prohibits any attempts to provide representative counsel to those employees … it should not be approved.”

More than 9,000 HBC workers are expected to lose their jobs as HBC tries to liquidate all but six of its stores to pay $1.1 billion to its credit and mortgage lenders. While workers were aware of HBC’s struggles, the decision to liquidate all its stores this month shocked many employees, union leaders and workers have both said.

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HBC went to court on March 7 to get an order to protect it from its creditors as it struggled to pay its dues to landlords, vendors and service providers. It took the step after a landlord locked it out of a store in Sydney, N.S., and a team of bailiffs attempted to seize merchandise from a store in Toronto’s Sherway Gardens mall.

The move was supposed to provide the company, which struggled to cope with the shift towards online shopping, with “breathing room” as it looked for financing. That plan, however, didn’t work out, as trade tensions between the United States and Canada pushed potential financiers to the sidelines, it said.

The court approved most of HBC’s proposals, such as the start of its liquidation, protection from creditors and monetization of its leases, but it has not yet approved the restructuring agreement that HBC wants to enter with its senior lenders.

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On Wednesday, HBC lawyer Ashley Taylor told the court that while the proposed agreement with its senior lenders was “not perfect,” it was a “big improvement from what” they were able to negotiate before.

“We are keen to focus on those processes rather than fighting with our friends,” he said.

HBC’s joint-venture partner, RioCan Real Estate Investment Trust, which co-owns several HBC stores, opposed the agreement. It said the requirement for the six stores currently not being liquidated to be added in early April limits chances of a successful outlook for the retailer.

“There is no reason for HBC to enter into the (restructuring agreement),” RioCan’s lawyers said in a filing. “It is effectively a cash collateral agreement and its terms expressly restrict HBC’s ability to advance a going-concern solution.”

The hearing will resume on Thursday morning.

• Email: nkarim@postmedia.com

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