An Ontario judge has rejected a proposed restructuring agreement for the iconic Hudson’s Bay Company department-store chain, marking a victory for landlords and other interested parties.

Lawyers for landlords and the Bay’s 9,600 employees had asked the court to deny senior secured lenders’ request to control the restructuring process. But the decision also raises the possibility that lenders may seek to push the company and all 96 of its stores, including Saks-branded locations, into receivership.

Through the proposed agreement, lenders sought to control a liquidation process that is now underway. Under that plan, only six stores in the Greater Toronto and Greater Montreal Areas would have remained open.

In a written decision issued Saturday, Justice Peter Osborne of the Superior Court of Justice stated that the proposed deal is “neither necessary nor appropriate at this time.”

The plan would have given Hudson’s Bay an April 7 deadline to secure a deal to keep its remaining stores open.

The proposal would have also imposed a weekly budget on the company, requiring regular reporting to the lenders, who have the right to seize Hudson’s Bay’s assets if debts remain unpaid.

If a potential buyer emerged, the agreement stipulated that the lenders would need to approve any sale.

Osborne expressed concerns over the plan’s implications, particularly regarding its impact on other stakeholders. News of the liquidation spread before it began and prompted a surge in reviews, enabling the company to repay its interim debtor-in-place financing facility, Osborne noted.

So Hudson’s Bay has more funds to work with as it goes through the restructuring process.

“With the relatively modest interim DIP facility approved in the initial order now having been repaid, and in the absence of any further commitment by the lenders to provide DIP financing on terms agreed by the applicants, I am not persuaded that it is appropriate in the circumstances of this case to grant these rights and protections to the lenders, and to the exclusion of other stakeholders,” he wrote in his decision.

The rejection of the restructuring proposal marks another chapter in the Bay’s ongoing financial struggles as the company grapples with $1.1 billion in debt.

The company has indicated that it may adjust which stores remain open depending on ongoing negotiations.

The restructuring plan had strong backing from many of the Bay’s lenders. Linc Rogers, a lawyer representing lender Restore Capital told court last week that the creditors did not want to fight and were willing to extend the liquidation process.

But Rogers had also warned that lenders could push the company and all of its stores into receivership if the proposal was denied.

However, major landlords, including Ivanhoé Cambridge, Oxford Properties, and Cadillac Fairview, opposed the plan. They argued that an alternative process allowing Hudson’s Bay to seek bids from potential buyers for its business or assets would offer a better outcome.

David Bish, a lawyer for Cadillac Fairview, had warned that approving the proposal would effectively place control of the chain’s future in the hands of the lenders. As a result, he contended, lenders would not be incentivized to restructure Hudson’s Bay. Rather, lenders would only be motivated to liquidate all assets instead.

Osborne said he was also concerned that the Bay and its lenders had not submitted a budget outline expenses tied to the proposed restructuring agreement.

Pending further decisions, Osborne effectively granted control of the restructuring process to the court-appointed monitor, as is customary in creditor-protection proceedings. Toronto-based Alvarez & Marsal is serving as the court monitor.

Osborne ruled that Alvarez & Marsal could bring any concerns about financial issues and other matters before the court quickly. Emergency hearings for companies under creditor protection are common, he noted.

But at least for now, Hudson Bay Company’s fate remains uncertain.

Hudson’s Bay is Canada’s oldest company, dating back to the fur trade era in the 1600s.

Pictured: Hudson’s Bay store in Ottawa.

Photo: Paul McKinnon / Shutterstock.com

Join Canada’s leading CRE owners, investors, developers, brokers, financiers, and more at Connect Canada on May 28 at Malaparte in Toronto. Register now to catch forecasts from Canadian CRE leaders on market challenges and opportunities, insights into international investing with evolving market dynamics, the outlook for multifamily housing, and much more. www.ConnectCanada2025.com