Latest news with #Saks'
Fashion United
10-07-2025
- Business
- Fashion United
Saks downgraded as S&P flags risk of default amid 600m dollar rescue deal
Saks Fifth Avenue, the storied American luxury department store, has seen its credit rating slashed to near-default levels by S&P Global Ratings. There are growing concerns about the company's financial health and its ability to meet obligations to creditors, including fashion brands and suppliers still awaiting payment. S&P downgraded Saks' issuer credit rating to CC, reported Bloomberg, 10 notches below investment grade, citing a 600 million dollar rescue package that includes a debt restructuring deal. In plain terms, the agency views Saks' latest financing manoeuvre as akin to a default. 'The downgrade reflects our view that the proposed financing transaction is tantamount to a default,' the agency said. A complex lifeline The package involves a 300 million dollar emergency loan from a group of investors who hold just over half of Saks' 2.2 billion dollars in high-yield bonds, issued only in December last year. Crucially, these lenders would be first in line to be repaid if the company were to go under. Also included in the deal is a 400 million dollars first-in, last-out (FILO) asset-based credit facility, a complex form of lending that gives priority to new lenders for repayment in the event of insolvency. Of this, 100 million dollars will be funded by exchanging existing senior secured notes. A further 200 million dollar is being committed, though that funding is contingent on certain conditions being met. The reshuffling of debt priorities has alarmed rating agencies and investors alike, particularly given the scale of Saks' outstanding obligations and deteriorating operations. Brands left waiting Although S&P did not disclose specific figures owed to vendors, industry insiders say fashion labels and designers — many of them small or independent — have been left in limbo, waiting on delayed payments for inventory already delivered. Sources familiar with the matter previously told The Business of Fashion and WWD that Saks has amassed a backlog of payables stretching across multiple seasons. Such delays can put considerable strain on suppliers, especially in the luxury segment where production cycles are long and capital-intensive. Operating pressures mount S&P cited 'a pronounced deterioration in operating performance and liquidity challenges' as major factors behind the downgrade. At the start of February, Saks' borrowing capacity under its 1.8 billion dollar asset-based loan had dropped sharply to just 415 million dollars, a sign of cash constraints exacerbated by a seasonal inventory build-up and overdue bills. The retailer's struggles come despite owning prime real estate, including its iconic New York City flagship, valued at more than 4 billion dollars on a net basis. However, S&P noted that Saks has been unable to convert these assets into cash quickly enough to meet pressing obligations. "We believe the company's market position will weaken as competitors with greater financial capacity expand their business operations," S&P stated. "Management has focused on negotiating longer terms with its main vendors and addressing overdue payments to improve its working capital management." Trouble at the top? Saks' woes follow its ambitious consolidation moves in 2023, when its parent company, Hudson's Bay Company (HBC), acquired rival luxury chains Bergdorf Goodman and Neiman Marcus. While the mergers were intended to create a North American luxury retail powerhouse, they have also added complexity and risk to the balance sheet. Now, faced with shrinking access to credit and nervous suppliers, Saks is under pressure to stabilise its operations while maintaining the high standards expected of a luxury brand.
Yahoo
09-07-2025
- Business
- Yahoo
S&P Cuts Saks Global's Credit Rating to CC
Saks Global's new $600 million in financing has it better positioned to pay vendors and rework its business — but the way the luxury retailer is raising that money has drawn the ire of Standard & Poor's. The debt watchdog downgraded Saks' credit rating to 'CC,' a significant drop from 'CCC-plus,' with a negative outlook. More from WWD After a Year of High-stakes Financing, Saks Turns Back to High-stakes Retailing Saks Global Bolsters Its Finances, Secures $600 Million in Commitments Saks Global Extends Partnership With NuOrder to Neiman Marcus and Bergdorf Goodman Late last month, the retailer lined up the financing just ahead of a crucial $120 million interest payment. It included $200 million in commitments that are subject to certain conditions and a $400 million first-in, last-out asset-based credit facility, carved out of the company's $1.8 million asset-based facility. But $100 million of the FILO facility included an exchange of some of the $2.2 billion in senior secured bonds the company sold in December to buy Neiman Marcus Group. S&P described the financing arrangement as 'tantamount to a default' as the bondholders 'will receive less value than they were initially promised and will rank lower in terms of priority than the new money notes.' The rating agency said it expects to lower its rating on Saks to 'selective default' or 'default' if the company goes through with the financing. When credit ratings are moved into default because of debt exchange, they often bounce back quickly. While going into default is not a good look for a company's finances, it is a distinction that lives mostly in finance circles and is not expected to alter Saks' plans or its ability to pay vendors. The company's also been finding extra money in operations as it integrates Neiman Marcus. 'We have both significantly accelerated our plans for synergy capture and increased our expected annual cost reduction to $600 million over the next few years,' Saks noted to WWD in a statement. The value of Saks' bonds have already been re-rated in the market, where they have traded as low as 34 cents on the dollar in May and have recently been trading at 51 cents. But the credit rating switch is a sign of just how much work Saks still has to do as it integrates Neiman Marcus, cuts costs, reestablishes itself with vendors and looks to grow with a new shop on Amazon. Although Saks was slow to pay vendors over the last couple of years, it has lately been said to be making its payments and is in the process of making good on past due bills. It will need to keep that flow of goods moving to perform its reset. 'A disruption in Saks' inventory flow has led to a pronounced deterioration in its operating performance and liquidity challenges,' S&P said in its downgrade. 'Overdue payments, borrowing base constraints, and seasonal inventory-building led to a decline in the availability under the company's $1.8 billion asset-based lending facility to $415 million as of Feb. 1. In addition, Saks reported a free operating cash flow deficit of $517 million in 2024.' And S&P said Saks Global's market position 'will weaken as competitors with greater financial capacity expand their business operations.' 'We forecast the company will report negative free operating cash flow over the next two years and continue to heavily rely on its ABL facility,' S&P said. 'While Saks has real estate assets worth over $4 billion on a net basis, it has been unable to monetize them in a timely manner to meet its financial commitments.' Marc Metrick, chief executive officer of Saks, prepped vendors for the S&P switch in a letter on Wednesday that was obtained by WWD. 'Recognizing that the media continues to actively cover Saks Global, I also wanted to take this opportunity to give you a preview of some developments we expect in the near term that may generate attention,' Metrick wrote. 'Of the up to $600 million of committed financing, $300 million was funded at the end of June. The next step with respect to the balance involves a bond exchange offer, which will launch in the coming days and is expected to be completed in August. There will be highly technical press releases issued at various times during the exchange offer, per legal requirements. 'As a result of the exchange transaction, S&P Global, a credit rating agency, recently issued an update on Saks Global. It is common and expected for S&P to issue an update on companies following the announcement of a financing transaction like we announced in late June. As part of this, S&P applies a formulaic and technical criteria when analyzing these transactions, which has led to a downgrade of Saks Global's credit rating. Additionally, when the bond exchange closes, we also expect S&P to apply what the rating agency refers to as a 'selective default,' which is also common for transactions of this nature.' Metrick said the company will soon be sharing its first-quarter results with bondholders and an update to its partners. 'You can expect us to focus on the fact that with the bolstered liquidity that the new financing provides, we will be even better positioned to execute on our strategy and capture significant growth opportunities within the luxury market,' he said. Best of WWD Harvey Nichols Sees Sales Dip, Losses Widen in Year Marred by Closures Nike Logs $1.3 Billion Profit, But Supply Chain Issues Persist Zegna Shares Start Trading on New York Stock Exchange Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Fashion Network
30-06-2025
- Business
- Fashion Network
Saks gets $600 million lifeline as creditors face steep losses
Saks Global Enterprises has reached a $600 million debt deal with a number of its existing investors that would force some creditors to accept losses and push them back in the repayment priority line. As part of the complex arrangement, a group holding a slim majority of the struggling luxury retailer's $2.2 billion of 11% bonds, which were just issued in December, provide Saks an immediate $300 million loan, according to deal terms reviewed by Bloomberg. That debt would be among the first repaid if the company goes bust. The retailer operates its flagship Saks Fifth Avenue stores along with Bergdorf Goodman and Neiman Marcus, rival chains it purchased last year. Lenders that aren't part of that group will have the option to help provide as much as $300 million of additional debt. That would be part of a debt exchange that would see the lenders swapping their outstanding notes for a lesser amount of new, lower priority securities with the same interest rate, a 2029 maturity and collateral. 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.
Fashion Network
30-06-2025
- Business
- Fashion Network
Saks gets $600 million lifeline as creditors face steep losses
Saks Global Enterprises has reached a $600 million debt deal with a number of its existing investors that would force some creditors to accept losses and push them back in the repayment priority line. As part of the complex arrangement, a group holding a slim majority of the struggling luxury retailer's $2.2 billion of 11% bonds, which were just issued in December, provide Saks an immediate $300 million loan, according to deal terms reviewed by Bloomberg. That debt would be among the first repaid if the company goes bust. The retailer operates its flagship Saks Fifth Avenue stores along with Bergdorf Goodman and Neiman Marcus, rival chains it purchased last year. Lenders that aren't part of that group will have the option to help provide as much as $300 million of additional debt. That would be part of a debt exchange that would see the lenders swapping their outstanding notes for a lesser amount of new, lower priority securities with the same interest rate, a 2029 maturity and collateral. 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.
Fashion Network
30-06-2025
- Business
- Fashion Network
Saks gets $600 million lifeline as creditors face steep losses
Lenders that aren't part of that group will have the option to help provide as much as $300 million of additional debt. That would be part of a debt exchange that would see the lenders swapping their outstanding notes for a lesser amount of new, lower priority securities with the same interest rate, a 2029 maturity and collateral. 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.
