Saks Mulls Bankruptcy After Raising Billions for Turnaround
(Bloomberg) — Facing limited options ahead of more than $100 million in debt payments due at the end of this month, Saks Global Enterprises is considering Chapter 11 bankruptcy as a last resort, according to people with knowledge of the situation.
The company is also considering additional ways to shore up liquidity, including providing emergency financing or selling assets, said the sources, who asked not to be named because they were not authorized to speak publicly. Some Saks lenders have held secret talks in recent days to assess the company’s cash needs, according to other sources familiar with the matter. These discussions focused on potential borrower credit, a type of bankruptcy financing.
Saks raised billions of dollars from bond investors late last year to finance a bold turnaround plan focused on buying Neiman Marcus, betting that scale would revive the struggling luxury retailer. Instead, the deal deepened the company’s debt burden and failed to resolve long-standing problems with vendors; Many of the sellers halted shipments due to missed payments, accelerating losses.
In June, Saks persuaded creditors to provide hundreds of millions of dollars more as part of a debt deal that rearranged repayment priorities and created multiple layers of bondholders with different claims on the company’s assets. Even those securities have fallen since then, raising concerns from investors that the turnaround efforts have expired.
“Together with our key financial stakeholders, we are exploring all potential avenues to ensure a strong and stable future for Saks Global and advance our transformation while providing our customers with exceptional products, superior experiences and personalized service,” a representative for Saks said via email. PJT Partners, which advises the company, declined to comment.
Last year’s merger with Neiman was aimed at creating companies including Amazon.com Inc. and Salesforce Inc. to create a multi-brand luxury giant powered by technology from new high-profile investors, including Salesforce Inc. But by May, bondholders were already facing paper losses of more than $1 billion due to the plan’s disruption.
Following the restructuring, Saks cut its full-year forecast in October after reporting lower sales due to inventory management challenges as it continued to defer payments to some vendors to save cash.
Saks faces more than $100 million in interest payments through Dec. 30, according to data compiled by Bloomberg. The $941 million portion of Saks’ restructured second issue notes in August was priced at about 6 cents on the dollar on Tuesday, according to data shared with Bloomberg. That’s down from about 36 cents two weeks ago. The price of approximately $762 million of more senior debt was stated at approximately 46 cents.
Saks was owned by historic Canadian retailer Hudson’s Bay, which liquidated stores this year following a restructuring effort. The Neiman Marcus transaction transformed Saks Global into a luxury retail offering combining Saks Fifth Avenue, Saks Off 5th, Neiman Marcus and Bergdorf Goodman.
(Updates with additional background information in last paragraph.)
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