Canadian department store operator Hudson's Bay Company has outlined a US$1.25bn refinancing plan that will allow it to improve and renovate its Saks flagship store.

The 20-year mortgage has been taken out on the ground portion of the Saks Fifth Avenue store in New York City. An independent appraiser valued the entire property at CAD4.1nn ($3.7bn).

The company acquired Saks for $2.4bn in cash last year, and assumed around $500m of Saks debt.

The news sent Hudson's Bay shares up more than 9% in midday trading yesterday.

The company reiterated that it will embark on a significant project to improve and renovate what is its most productive store.

CEO Richard Baker, said: "This renovation, which will commence in the first half of 2015 and is expected to cost approximately $250m, is intended to significantly enhance the store productivity and we believe will lead to material value creation in the asset. This mortgage transaction allows us to capitalise on the value of this asset today, but also provides structural flexibility to capture additional value creation in the future."

All proceeds from the financing, net of associated cash expenses, will be utilised to permanently pay down around $1.2bn of HBC's first term loan, which currently bears interest at a floating rate of 4.75% and matures in 2020.

In September Hudson's Bay more than halved its losses during the second quarter, thanks to a near-doubling of sales.

The company's net loss amounted to CAD36m (US$32.6m) for the 13 weeks to 2 August, compared to a loss of CAD81m in the same period of the prior year.