42 LEXPERT MAGAZINE
|
JULY/AUGUST 2016
FEATURE
CONFRONTATION TO COLLABORATION TO UNANIMITY.
Bitter public backlash to creditor consensus. Reputational risk to effective damage control.
ese are the hallmarks of Target Canada Co.'s restructuring, representing a 16-month-
long swing of the pendulum in a proceeding that could otherwise have culminated in years
of litigation and uncertainty for small and large creditors alike — not to mention a bigger
black eye for the Target brand, already diminished by the well-documented litany of un-
preparedness and poor judgment culminating in a debacle that included what was then
the largest mass termination of employees in Canada.
On January 15, 2015, Target Canada announced that Ontario Superior Court Justice
Geoffrey Morawetz had granted it creditor protection under the Companies' Creditors Ar-
rangement Act. e Canadian operation had averaged $200 million in losses in each quar-
ter of its existence. It had liabilities exceeding $5 billion.
Within three months, Target had shuttered 133 stores in Canada. It was a stunning
demise to the US chain's first international foray, ever so far removed from its expectation
of profitability within its first year of operations. e end came just four years aer the par-
ent company, Target Corp., spent $1.8 billion to purchase the leases of the defunct Zellers
chain as part of its $7-billion investment in Canada.
In February 2015, the court approved an inventory and real estate liquidation and
sale process that was substantially concluded by the fall. e parties then undertook a
TARGET
LITIGATION
Target Canada may be gone, but its quick
and orderly exit through an extremely complex
restructuring should serve as guidance
for American chains seeking to do business
in Canada BY JULIUS MELNITZER
PHOTO:
SHUTTERSTOCK