The first of a two-day courtroom battle over B.C. billionaire mall owner Ruby Liu’s proposed acquisition of 25 more Hudson’s Bay Company leases began Thursday in Toronto.

The highly anticipated hearing drew an overflow crowd, The Toronto Star reported, as only Liu, landlords, lenders and their attorneys were allowed in the primary courtroom. Observers, including many prospective employees of a new department-store chain that Liu hopes to launch, were herded into another room.

The fate of her bid is expected to be determined as the hearing concludes Friday.

Despite facing long odds, Liu is predicting that she will prevail in her battle to buy the leases of former Bay stores in B.C., Alberta and Ontario. She has already secured three leases at B.C. malls that she owns.

“I’m nervous now,” Liu told the Star inside the courthouse Thursday. “I’ve been looking forward to this day for a long time.”

Most of the properties’ landlords, including Cadillac Fairview, Oxford Properties, Morguard and QuadReal, strongly oppose the proposed acquisition. The majority of Bay lenders, except Pathlight Capital, have also voiced strong objections to it.

Monitor Alvarez & Marsal has also advised the court to reject the proposed deal due largely to Liu’s company’s fledgling status, her lack of retail experience and concerns about how her chain would procure merchandise, among other factors.

Alvarez & Marsal’s position is a potential deal breaker, given that Judge Peter Osborne could base his ruling largely on it in accordance with bankruptcy law and precedents.

Liu has continued to dismiss the landlords’ concerns, reiterating that mall owners are keen to reclaim the long-term leases, which are well below today’s market value, and redevelop the spaces into lucrative mixed-use assets. She has also contended that Alvarez & Marsal should focus on the legality of the lease-sale process rather than her business capabilities.

The now-defunct department-store chain is seeking to force landlords to accept Liu’s proposed deal. The forced action is permitted under the Canadian Companies’ Arrangement Act, pending court approval. Landlords argue that the Bay is only supporting Liu’s bid to appease Pathlight, which is owed $68 million.

Liu’s proposed $69.1-million price for the remaining 25 leases would cover a fraction of the Bay’s $1.1-billion debt.

As the hearing began, Maria Konyukhova, a Bay lawyer told the court that Liu’s proposed transaction is the “last and only chance” to monitor any of retailer’s leases, the Star reported. She also described the landlords’ objections to the proposed takeover of former Bay spaces as “exaggerated” and contended that they were based on an “absurdly high standard,” the report states.

But Justice Peter Osborne questioned why Liu’s plan relies on the Bay’s 2025 financial forecast that did not work, according to the Star.

Pictured: Closed Bay store at Market Mall in Calgary. The former store space is part of Liu’s proposed is part of Liu’s proposed lease-purchase agreement.

Photo: Monte Stewart. All rights reserved. No republishing permitted.