Saks in Talks for $1 Billion Bankruptcy Loan to Keep Doors Open

(Bloomberg) — Saks Global Enterprises is considering arranging a loan of up to $1 billion to keep the business running as part of a Chapter 11 bankruptcy filing that could happen in the coming weeks, according to people familiar with the situation.

The cash-strapped luxury retailer, which skipped a total of more than $100 million in interest payments to bondholders due on Dec. 30, is negotiating forbearance with some creditors, said the sources, who asked not to be named because the talks are private. This may give the company more time to negotiate a financing agreement or prepare a restructuring plan.

Some Saks bondholders have discussed a so-called borrower loan, which could include at least $750 million in new money and a potential collection of existing debt that would allow the company to continue operating after filing for bankruptcy, sources said. Still, they said the situation is evolving rapidly and any financing structure could change.

Messages sent to Saks were not returned, while a representative of company advisor PJT Partners declined to comment. The New York Post previously reported some details of a potential DIP loan.

Saks, whose roots date back more than 150 years, is trying to close a liquidity gap due to inventory and cash flow pressures. It hit a milestone nearly 12 months after raising billions of dollars from bond investors for a turnaround plan that included the acquisition of Neiman Marcus.

In June, creditors agreed to provide Saks with hundreds of millions of dollars more as part of a debt deal that realigned the repayment pipeline and created multiple layers with different claims on the company’s assets.

However, the company continued to struggle with lackluster sales and inventory issues. Amid its financial woes, Saks said Friday that Chief Executive Officer Marc Metrick will resign and be replaced by Chief Executive Officer Richard Baker.

The chain operates flagship Saks Fifth Avenue stores along with Bergdorf Goodman and Neiman Marcus. In October, it lowered its full-year forecast after reporting lower sales due to inventory management difficulties. It reported that its revenue fell 13% year over year to $1.6 billion in the second quarter. At the time, management said it was exploring the sale of a minority stake in Bergdorf Goodman to raise funds.

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