Saks gets $600 million lifeline as creditors face steep losses
The majority holders — who would bridge any shortfall in the second $300 million — will also participate in the swap but won't have to take a so-called haircut as part of the transaction. Investors who don't take part in the exchange will see their debt fall to the bottom of Saks' capital structure and lose creditor safeguards known as covenants, according to the deal terms.
A representative for Saks Global declined to comment on the terms of the financing.
Just six months ago, investors scooped up the $2.2 billion of notes that are now part of the debt swap in order to finance Saks' takeover of competitor Neiman Marcus. That debt tumbled to a record low 34.5 cents on the dollar Thursday after Bloomberg reported initial details of the exchange, according to the bond-price reporting system known as Trace.
It's the latest instance of a debt deal pitting creditors against each other in order to score breathing room for a troubled company — and its equity stakeholders. Saks' majority creditors were advised by Lazard Inc. and Paul Weiss Rifkind Wharton & Garrison, while minority creditors were represented by Greenhill & Co. and Glenn Agre Bergman & Fuentes.
The up to $600 million loan comes with a fixed 11% coupon, according to people with knowledge of the matter. A separate financing commitment agreed to in May will no longer go ahead, Bloomberg News previously reported.
The creditor protections on Saks' new bonds are slightly stronger than those on the outstanding 2029 notes, according to the deal terms reviewed by Bloomberg. They put limits on Saks' ability to create new subsidiaries that can issue new debt, and they effectively block any possible repeat of a transaction that reshuffles the company's payment priority ranks.
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