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Target Canada’s proposed recovery plan, filed Nov. 27, calls for other major landlords to release their guarantees, which could be worth millions of dollars.MARK BLINCH/Reuters

Major landlords of insolvent Target Canada are pushing the retailer to disclose details of a $132-million settlement with its largest landlord, RioCan Real Estate Investment Trust, in exchange for other concessions.

The former landlords, including Morguard Investments Ltd., Crombie Real Estate Invest Trust (REIT) and Smart REIT are questioning whether they are getting a comparatively raw deal in Target's proposed recovery plan.

"We do feel we have not been fairly treated," Linda Galessiere, a lawyer at McLean & Kerr LLP, which represents the major landlords, said in an interview.

On Nov. 23, RioCan, which had guarantees covering 18 of the 26 Target stores in its malls, revealed its $132-million settlement with the retailer's U.S. parent. In exchange, RioCan agreed to drop its claim to the guarantees that parent Target Corp. had pledged to it and other landlords for lost rent on store leases if Target Canada faltered.

Now Target Canada's proposed recovery plan, filed Nov. 27, calls for other major landlords to release their guarantees, which could be worth millions of dollars. But the other landlords fear Target will pay them less than RioCan secured in relation to their claims.

The squabble will come to Ontario Superior Court on Monday as landlords fight for their guarantees and more information about the RioCan deal.

Doral Holdings Ltd. is among other landlords battling Target's proposed plan and its provision to eliminate the guarantees. "Doral's guarantee was to be treated as sacrosanct under earlier court orders in these proceedings," Doral president S. Michael Belcastro said in a court document. "It is not under the plan."

On Jan. 15, Target Canada got court protection from creditors, owing them more than $2.6-billion. It closed all 133 of its stores by mid-April. Its U.S. parent said it would pay landlords their guarantees, but the Canadian division's recovery plan reneges on that pledge in exchange for the parent subordinating its intercompany claims to those of unsecured creditors.

Many landlords are balking and seeking the RioCan settlement details. "The bottom line is we need that information and it's premature to vote on the plan without that disclosure," Vern DaRe, a lawyer at Fogler Rubinoff LLP, which represents Doral, said in an interview.

Doral's roughly $6-million claim, for example, has been reduced to just about $1-million under the proceedings.

Landlord KingSett Capital Inc. has "serious concerns" about the terms of Target Canada's plan, said Matthew Gottlieb, a lawyer at Lax O'Sullivan Lisus Gottlieb LLP, which represents KingSett, in a court filing. The plan violates the court order and insolvency laws and "improperly confiscates" some landlords' rights, he said in a court document.

"Target U.S.'s position creates a clear conflict of interest between the non-guaranteed creditors, who it is said will benefit from the plan's success as compared to a bankruptcy, and the guaranteed creditors, who lose considerable rights under the plan," he said in the filing. "Simply put, the plan confiscates the guaranteed creditors' rights to benefit the non-guaranteed creditors."

RioCan officials declined to comment. It could potentially have claimed as much as $250-million, its chief executive officer Edward Sonshine has said.

Target Canada lawyers say in a court filing: "The landscape of this restructuring has shifted considerably, most notably in the form of the material economic contributions that are being offered by Target Corp., as plan sponsor, in order to effect a global resolution of all of the the matters arising from the estate" of Target Canada.

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