NEW YORK, United States — Saks Fifth Avenue owner Hudson’s Bay denied allegations in a lawsuit that an internal restructuring amounted to a move to strip the company of its assets and impair collateral for a loan to subsidiaries of a real estate joint venture.
In a memo filed Saturday in New York in response to the lawsuit by US lenders, the company called it “a transparent attempt to gain leverage in negotiations” with the borrowers, who are landlords of 34 Saks and Lord & Taylor stores. Owned by a Hudson’s Bay joint venture, they defaulted on $7.4 million of payments of a $846 million loan as retailers stopped paying rent after the coronavirus pandemic forced them to close, according to the document.
The lawsuit by the lenders called the reorganisation a “corporate shell game.” They also separately sought a prejudgment to freeze the parent company’s assets, the company said.
Hudson’s Bay, formerly headquartered in Toronto and known as HBC, was taken private earlier this year and reorganised by its new owners “to optimise their Canadian and foreign operations and assets from a tax perspective,” according to the filing. It was converted into HBC ULC under British Columbia law, with Bermuda-based HBC Bermuda set up as the parent entity.
HBC continues to exist, owns the same assets and is bound by the same agreements that pre-date its restructuring, the company said. That includes a guarantee of rent payments to the landlords of the 34 stores, but not a guarantee on the loan, which is backstopped by the real estate.
The amount defaulted relates to debt repayment in April and May, and the borrowers were “in the middle” of talks with the lenders when the suit was filed, the company said.
“Covid-19 has had a devastating human and financial cost” to the company, according to the filing. Freezing its assets “will cripple HBC’s efforts to get its retail stores reopened in a staged and safe manner for employees and associates.”
By Sandrine Rastello