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Dive Brief:
Saks Global has secured $600 million in financing commitments from most of its bondholders. The deal, announced Friday, includes a $400 million first-in, last-out asset-based credit facility, plus $200 million subject to certain conditions.
The $400 FILO includes $300 million funded on Friday and $100 million that will be funded once a bond exchange is completed, per Saks Global’s release.
With this deal, the department store company will not pursue the $350 million in financing that was slated to close Monday. Those commitments from SLR Credit Solutions included a $300 million first-in, last-out facility and a $50 million secured term loan facility.
Dive Insight:
Saks Global’s bondholders appear to be jockeying for position at an uncertain time for the newly minted department store conglomerate.
While the agreement announced Friday doesn’t boast quite as much new financing as the one forged last month, it does similarly help support Saks’ preparations for the all-important fourth quarter. S&P Global Ratings analysts in May had warned that the company’s “less-than-adequate liquidity position” would probably make it challenging to build up seasonal inventory.
“I believe it will get them through the holiday season, but I can’t predict what will happen after that,” Tim Hynes, head of credit research at Debtwire, said by phone.
Unpredictability has dogged Saks Global since it was formed at the end of last year when parent HBC acquired Neiman Marcus Group for $2.7 billion; the entity combines luxury department stores Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, plus off-pricer Saks Off 5th.
The tie-up is supposed to yield savings as the retailers merge many of their teams and rationalize the brick-and-mortar footprint. Saks Global has announced a series of layoffs since last year, most recently this past spring. The company shook up its merchandising team about a year ago and its store operations team earlier this month.
That has helped Saks Global with its five-year goal to achieve $600 million in synergies, with $285 million in run-rate synergies by the end of this fiscal year, executives told BMO Capital Markets in early June. That is about $100 million higher than the original target, and the 2025 run-rate nearly double, according to BMO. There is no plan to close stores, however, per that report.
At the same time that Saks Global prepares for the coming holiday season, it must begin settling accounts with vendors that haven’t been paid for months. Earlier this year, in a plan that unnerved suppliers and analysts alike, CEO Marc Metrick laid out an unusual system where, starting in July, past-due invoices will get paid in 12 monthly installments.
All the uncertainty has left an opening for rivals, particularly Nordstrom, analysts say.