Saks Global Enterprises, the parent company of luxury retail brands like Saks Fifth Avenue and Neiman Marcus, is reportedly considering filing for Chapter 11 bankruptcy protection. This drastic step is being evaluated as a last resort ahead of a crucial debt payment exceeding $100 million, which is due on December 30.
Exploring All Avenues for Survival
According to sources familiar with the internal discussions, the company's options are limited. Alongside the potential bankruptcy filing, Saks is also weighing other measures to improve its liquidity. These include raising emergency financing and selling off assets. The situation is so dire that some of the company's lenders have begun confidential talks in recent days to assess its immediate cash requirements. These discussions have specifically focused on arranging a debtor-in-possession (DIP) loan, a specialized form of funding used during bankruptcy proceedings.
A company representative stated via email, "Together with our key financial stakeholders, we are exploring all potential paths to secure a strong and stable future for Saks Global and advance our transformation." PJT Partners, the firm advising Saks, declined to comment on the developments.
A Turnaround Plan That Backfired
The roots of the current crisis lie in a bold strategic move. Late last year, Saks raised billions of dollars from bond investors to finance the acquisition of rival Neiman Marcus. The plan was to create a luxury retail giant with scale, backed by high-profile tech investors like Amazon.com Inc. and Salesforce Inc..
However, the merger failed to deliver the promised revival. Instead, it significantly deepened the company's debt burden and did not resolve ongoing disputes with vendors. Many suppliers halted shipments after missed payments, which accelerated the company's financial losses. By May, bondholders were facing paper losses exceeding $1 billion.
Deepening Financial Troubles and Investor Flight
In a bid to buy more time, Saks persuaded creditors in June to provide hundreds of millions of dollars more in a complex debt deal that reshuffled repayment priorities. This created multiple tiers of bondholders with different claims on the company's assets. Despite this restructuring, the company's financial health continued to deteriorate.
In October, Saks was forced to cut its full-year sales forecast, citing challenges with inventory management. To conserve cash, it continued delaying payments to some vendors. The market's confidence has evaporated, as seen in the plummeting value of its bonds. As of Tuesday, a $941 million portion of its second-out notes, restructured just in August, was quoted at about 6 cents on the dollar, a sharp fall from roughly 36 cents two weeks prior. More senior debt of about $762 million was quoted at around 46 cents.
Saks Global was formed after the Neiman Marcus transaction, combining Saks Fifth Avenue, Saks Off 5th, Neiman Marcus, and Bergdorf Goodman. It was previously owned by Hudson's Bay Company, the historic Canadian retailer which also faced its own struggles this year.
