Target Canada has come to a deal with its landlords over its lease-sale process, neutralizing their threat to push the retailer into all-out bankruptcy.
The U.S.-owned retailer, which is leaving Canada, has agreed that the court-appointed monitor in the current insolvency proceedings can take more control of running the lease-sale process from Target Canada, according to a court filing this week. Target is trying to sell its leases to new tenants.
Target has also responded to landlords' concerns that the process would drag on indefinitely by setting May 15 as a deadline to shoot for in completing the sale process – with deals generally concluded no later than June 30, the filing says. By then, leases will be returned to landlords if they're not sold, it says.
The landlords had suggested that Target Canada, the Canadian unit of Target Corp., be forced into bankruptcy as a way to shift control of the liquidation and lease-sale process from the retailer to a third-party trustee in bankruptcy, who would act on behalf of creditors, including the landlords.
But the landlords also argued that if the proceedings were to remain under the current statute – the Companies' Creditors Arrangement Act (CCAA) – the court-appointed monitor run the lease sales rather than Target Canada.
The landlords want to get the lease-sale process completed quickly so they can regain control of their properties. They wanted certainty that by a set deadline, their Target leases will have been sold to another tenant or returned to them.
Target stores were designed as anchor mall tenants to attract more shoppers to a shopping centre. A vacant Target store will hurt an entire mall, property owners say.
On Jan. 15, Target Canada was granted court protection from creditors under CCAA, saying it was closing all 133 of its stores by May 15, and in many cases sooner. It said it couldn't see a path to profit until 2021, leaving 17,600 employees out of work by the spring. Last Thursday, it started its liquidation sales.
Target and the landlords will ask Ontario Superior Court on Wednesday to approve their agreement.
As well, Target will tell the court it has turned down a request from its franchised pharmacists for added financial help as they grapple with the retailer's insolvency.
The pharmacists said they have been left in a difficult situation, with debts to pay and a Target-imposed Feb. 26 deadline to leave their stores while having to find a buyer for their patient records. Target said in a court filing the pharmacists can have three more days or, in some cases, until March 30, to leave.
It says it will not provide more funds to the pharmacists, arguing that the Target pharmacy franchise model is "a relatively 'low investment,'" which required only small upfront payments on the part of franchisees, a filing says. Target paid the pharmacy franchisees about $930,000 a month to help support them, it says. The franchisees paid for drug inventory, costs they may partly recoup by reselling the goods to other pharmacies or back to the wholesaler, a court document says.
William Sasso, a lawyer at Sutts Strosberg LLP who represents the pharmacists, said in an interview the fact that Target had to provide financial relief to the franchisees shows they're "in dire financial straits."