Saks Moves to Restructure $600 Million in Debt Amid Bankruptcy Concerns

Saks Global Enterprises saves itself from bankruptcy by refinancing its debt. The holding company resulting from the integration of Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue and Saks Off 5th has reached an agreement with its creditors to refinance $600 million, something that forces them to accept losses.

The company is going through a critical moment, with a high level of debt and liquidity problems. In June, it closed a $350 million financing transaction with SRL Solutions to alleviate the tensions derived from the acquisition of Neiman Marcus last December. This year it also cut 3% of its workforce. Specifically, it eliminated 550 jobs.

As reported by Bloomberg, creditors will have to exchange their current promissory notes for new debt instruments of lower priority, although they will maintain the same interest rate. On the other hand, those who do not participate may lose protection in the event of default.

The agreement also contemplates an immediate loan of $300 million from a group of creditors, which would provide Saks with the liquidity it needs in the short term.

Saks Global will receive a $300 million loan to address its liquidity needs

The new bonds issued will include greater protection for creditors, such as limits on the creation of indebted subsidiaries and blocks to restructurings that alter the priority of payments.

Last December, Hudson’s Bay Company (HBC) took control of Neiman Marcus for $2.7 billion. The transaction resulted in the creation of a new company called Saks Global, which was headed by Mark Metrick, CEO of Saks. The two companies combined totaled 170 physical assets, including Saks’ outlet stores.