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(Bloomberg) — Hudson’s Bay Co. ULC can begin liquidating all but six of its stores on Monday, an Ontario court decided on Friday, ending an era of department store dominance for Canada’s oldest company.

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The Ontario Superior Court approved the retailer’s wind-down proposal as it tries to find restructuring solutions with its creditors and landlords. The liquidation will last until mid-June. Justice Peter Osborne also approved keeping on key employees to help with attempts to restructure the remaining stores. 

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The six stores spared from the liquidation process are located in Ontario and Quebec, including the flagship Yonge-Queen location in downtown Toronto. HBC owes around C$1.1 billion ($766 million) in secured debt.

Ashley Taylor, the lawyer representing HBC, told the court on Monday that HBC’s efforts to solve its cash crisis “failed” after approaching 19 potential lenders and landlords for rent relief. The court approved a financing facility for HBC earlier this month that now totals C$23 million. 

On Friday, HBC agreed to pay monthly rent of C$7 million to the joint venture it holds with landlord partner RioCan REIT, down from C$10 million, subject to certain conditions. A previous decision had suspended those rent payments altogether.

Canaccord Genuity Corp. downgraded RioCan to a hold rating on Tuesday because of its exposure to HBC, with analyst Mark Rothschild saying that replacing the tenant cash flow is “not likely to be an easy undertaking.” RioCan’s joint venture with HBC had a carrying value representing 3.3% of its equity, according to a company statement. 

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“This overhang can last a long time,” Rothschild said in a interview prior to the decision. “And in my experience, when you lose a tenant, a big tenant, it is typically longer and more expensive to replace than what people believe initially.”

RioCan didn’t immediately respond to a request for comment after Friday’s ruling. 

Older Than a Nation

“When I think of The Bay, I think of the 1970s when I was a kid and The Bay was a powerhouse,” said independent retail analyst Bruce Winder. “They were the place you went for almost all kinds of goods, whether it was clothing or electronics or sporting goods or toys. I mean, it was a force to be reckoned with.”

HBC was founded in 1670, when it received a royal charter from King Charles II of England to run fur trading across a large territory surrounding Hudson Bay. It’s the longest continuously operating company in North America and pre-dates Canada itself. “This ‘company of adventurers’ played a pivotal role in forming the country and its character,” said a 1992 Bloomberg Businessweek review of an HBC anthology by Canadian author Peter C. Newman. 

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The retailer’s headquarters moved to Canada from the UK in 1970, coinciding with a period of expansion that added chains such as Shop-Rite, Zellers and Simpsons to HBC’s portfolio. Kenneth R. Thomson, at one point Canada’s richest man, bought 75% of HBC in 1979. His family sold its interest in 1997, a few years after Walmart Inc. arrived in Canada, upending the retail landscape.  

US investor Jerry Zucker took HBC private in 2006; US real estate investor Richard Baker then led a takeover in 2008 and filed for an initial public offering in late 2012. Shares peaked at C$28.10 in February 2015 before declining. Baker then took HBC private again in March 2020. 

Changing consumer tastes, a shrinking middle class, an ill-fated expansion strategy — the company made a brief foray into Europe in the 2010s — and the challenges posed by the Covid-19 pandemic led to HBC’s downfall, Winder said. 

HBC’s retreat from the Canadian retail sector will leave “a massive ugly hole in a number of malls,” he said, but the greater impact may be cultural.  

“It’s going to hurt the Canadian psyche” to lose a 355-year-old icon, Winder said. “And it’s going to be a bit of a gut punch at a time when the country’s vulnerable.”

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