HBC Refutes Lenders’ Accusations of ‘Corporate Shell Game’

Hudson’s Bay Co. has refuted lenders’ claims that it had organized a “clandestine corporate shell game” as the company went private.

In a filing over the weekend in New York, the Canada-based retail group responded to a group of United States lenders, who accused HBC of undermining the creditworthiness of a loan that faces default in its move to privatize.

In its response, the company claimed that the lenders filed suit in a “transparent attempt to gain leverage” in negotiations with HBC, which serves as the landlords of nearly three dozen Saks Fifth Avenue and Lord + Taylor stores. The loan — which was provided by JPMorgan Chase, Bank of America and Column Financial — is secured by 10 Saks stores and 24 Lord + Taylor stores across 15 states.

Prior to going private, HBC was the parent company of both brands and the tenant at all 34 stores, as well as served as a partial landlord through a joint venture with America’s largest mall operator, Simon Property Group. (In August, HBC sold Lord + Taylor for $100 million to clothing rental service Le Tote.)

Watch on FN

The lenders’ suit indicated that HBC defaulted on $7.4 million worth of payments on a $846 million loan as most nonessential retailers were forced to keep their stores shuttered over the past couple months amid the COVID-19 outbreak. According to HBC’s response, it was in the middle of discussions with lenders when the latter sought legal action against HBC.

The company further stated that the coronavirus pandemic has “had a devastating human and financial cost.” As lenders sought a prejudgment to freeze its assets, the retail group noted that this could “cripple HBC’s efforts to get its retail stores reopened in a staged and safe manner for employees and associates.”

HBC — parent to Saks Fifth Avenue and namesake chain Hudson’s Bay — received approval to go private early this year following months of back-and-forth buyout proposals. It reorganized to focus on its more profitable businesses, reduce operating costs and capitalize on the value of its real estate.

FN has reached out to HBC for comment.

Access exclusive content