The Hudson’s Bay Company is expected to close several locations as part of a restructuring effort designed to protect the iconic department store chain from bankruptcy.

On Monday, an Ontario court HBC granted a 10-day stay of proceedings against creditor actions and approved the retailer’s request for $16 million in debtor-in-possession financing. The court also granted a stay of proceedings against an HBC-RioCan joint-venture that involves many stores.

The Globe and Mail reported that HBC could close up to 50% of its stores as part of the restructuring effort.

HBC announced late Friday that it had commenced proceedings under the Companies’ Creditors Arrangement Act (CCAA) to address financial pressures exacerbated by economic challenges, trade uncertainty, and shifting consumer behaviour. The Ontario Superior Court of Justice (Commercial List) appointed Alvarez & Marsal Canada as the monitor to oversee the proceedings.

“Hudson’s Bay has been a vital retailer to Canadians for generations, and this decision was made with the best interests of our customers, associates and partners in mind,” said Liz Rodbell, president and CEO of HBC in a news release. “While very difficult, this is a necessary step to strengthen our foundation and ensure that we remain a significant part of Canada’s retail landscape, despite the sector-wide challenges that have forced other retailers to exit the market.”

HBC is Canada’s oldest company dating back to 1670. The company cited various financial difficulties, including rising costs of living, reduced consumer spending, and the lingering impacts of the pandemic. HBC stated that trade tensions and new tariffs have disrupted refinancing efforts, making it difficult to secure capital.

“Earlier this year, we worked with potential investors to refinance a portion of our credit facilities to improve our liquidity and support our business plan,” Rodbell said. “However, the threat and realization of a trade war has created significant market uncertainty and has impacted our ability to complete these transactions.”

As part of the restructuring, HBC is exploring strategic alternatives to preserve jobs and maintain operations where possible. The retailer continues to operate its 80 Hudson’s Bay stores and TheBay.com, along with Saks Fifth Avenue and Saks Off 5th stores in Canada, which are under a licensing agreement.

The three Saks Fifth Avenue stores and 13 Off Fifth locations are separate from the bankruptcy-protection proceedings and will continue to operate.

The restructuring could also affect landlords, including Primaris REIT, which has 10 HBC locations located across Canada in its portfolio totalling 1.12 million square feet of gross leasable area. HBC is the 12th-largest tenant by annualized minimum rent for Primaris, generating approximately $11.6 million in gross rental revenue per year, the REIT said in a news release.

The potentially affected stores range from locations in the Les Galeries de la Capitale mall in Quebec City to Orchard Park Shopping Centre in Kelowna, B.C.

“Primaris REIT has been preparing for this day for a very, very long time, in fact years,” said Patrick Sullivan, president and CEO of Primaris. “We have learned so much over the past 10-plus years with the departure of Zellers, Target, Sears and, now, potentially HBC. Although there could be an impact to our financial and operating metrics in the short term, Primaris has detailed plans for all 10 locations and is ready to take action if and when any locations are disclaimed.”

The Primaris overall portfolio contains 2,700 stores, of which 35 have co-tenancy clause as an anchor tenant.

But Primaris said they will not necessarily kick in with the HBC case.

“Co-tenancy clauses are provisions commonly found in commercial real estate leases that stipulate certain conditions under which a tenant’s rent or other obligations may be reduced or modified,” said Primaris. “These clauses typically come into effect when specific anchor tenants, such as HBC, or a certain percentage of tenants within a shopping centre or retail complex cease operations or vacate their premises.

“These clauses may not be triggered simply by HBC closing. The purpose of a co-tenancy clause is to protect tenants from potential loss of business and foot traffic due to the absence of prominent anchor tenants. Over the past number of decades, reference to anchor requirements and named tenants have been removed from tenants’ leases due to the changing enclosed-mall merchandise mix and the reliance on anchor tenants for foot traffic.”

Judge J. Osborne ruled that HBC co-tenancy clauses will be decided on a property-by-property basis as the court proceedings continue.

HBC has secured initial financing from Restore Capital, LLC, an affiliate of Hilco Global, and other lenders, with plans to seek additional funding during the CCAA proceedings. The company stated that it remains committed to re-establishing its presence in the Canadian retail sector.

In 2024, the chain and its real estate assets became a standalone entity after the retailer completed its US$2.65-billion acquisition of U.S.-based Neiman Marcus.

Pictured: Hudson’s Bay store in Markham, Ont.

Photo: JHVEPhoto / Shutterstock.com