Saks Global struggles to line up bankruptcy financing

Struggling retail chain Saks Global is struggling to raise up to $1 billion in financing to keep its business afloat amid a potential Chapter 11 bankruptcy filing, CNBC has learned.

The luxury chain is working to secure a “debtor-owned” loan that would allow it to finance its operations in the event of a potential bankruptcy filing, people familiar with the matter said. But investors have so far shown little interest in lending money to Saks because they doubt the company can successfully reorganize and repay the money, said the sources, who spoke on condition of anonymity because the talks were private.

Although DIP lenders get repaid before other creditors during bankruptcy proceedings, they don’t always get back their full investment, and some investors are concerned that might happen if they finance Saks.

Currently owned by Neiman Marcus and Bergdorf Goodman, the 159-year-old department store is both a destination and symbol of luxury fashion, known for offering top brands like Chanel and Dior, as well as up-and-coming brands like Good American. Saks Global has more than 70 full-line luxury stores and nearly 100 discount locations throughout the organization.

Because Saks missed paying interest to bondholders late last month, only a “limited number” of investors showed interest in financing the DIP loan, while some others declined to participate, sources said.

Saks declined to comment on investors’ interest in the fundraising effort.

A wide range of firms, including major banks and private equity, invest in companies that may be headed for bankruptcy. But one source said the only firms that might be interested in investing in Saks at this point would be either liquidators with investment vehicles or alternative asset managers with experience in the distressed retail space. Still, some of the investors refused to participate in Saks’ DIP loan, the sources said.

Liquidation is one of many potential outcomes Saks now faces. However, this scenario will be more likely if he cannot arrange a DIP loan to be used to pay essential expenses such as payroll, rent, and inventory. The retailer is already having difficulty paying these costs.

Failing to arrange financing would prevent Saks from filing for Chapter 11 bankruptcy, giving the company a chance to reorganize and potentially find a buyer willing to keep its business going. It may then face Chapter 7 bankruptcy, earmarked for liquidation.

It could mean the end of one of history’s most legendary department stores, whose flagship store on Fifth Avenue, considered by some to be its most valuable asset, has become a global destination.

Meanwhile, Saks is also in talks with liquidators for some stores that are in the process of closing but have not yet closed the entire chain, sources said.

Saks’ troubles have been mounting since it acquired longtime rival Neiman Marcus in 2024 in a $2.7 billion deal financed largely by debt.

The merger between the two rivals was expected to create a luxury retail powerhouse that would be better able to regulate costs and negotiate with vendors.

Instead, Saks struggled to pay its vendors on time, resulting in stock gaps and declining sales. The slowdown in the overall luxury market, where growth has stagnated in recent years, has further compounded the problems.