The financing package includes a debt exchange and a re-tiering of its outstanding senior secured notes, with a planned exchange of its notes at a discount to par, S&P Global Ratings said in a Tuesday (July 8) blog post.
“The noteholders will receive less value than they were initially promised and will rank lower in terms of priority than the new money notes following the completion of the transaction,” the blog post said.
S&P Global Ratings also said in the post that Saks Global has faced a deterioration in its operating performance and liquidity challenges due to disruption in its inventory flow; a decline in the availability under its asset-based lending facility due to overdue payments, borrowing base constraints and seasonal inventory building; and a free operating cash flow deficit of $517 million in 2024.
“We believe the company’s market position will weaken as competitors with greater financial capacity expand their business operations,” the post said.
Saks Global did not immediately reply to PYMNTS’ request for comment.
Retail Dive reported Wednesday (July 9) that a Saks Global spokesperson said the rating update “is common and expected with transactions like these.”
“It is important to note that there will be no default under Saks Global’s existing agreement as a result of the transaction,” the spokesperson said, per the report. “Importantly, this has no impact on our operations, and we remain confident in our ability to deliver for our stakeholders given this financing package, accelerated synergy realization, and improving inventory flows.”
When announcing the financing package in a June 27 press release, Saks Global Operating Group CEO Marc Metrick said it reflects the company’s bondholders’ continued confidence in the business and its strategic direction.
“This comprehensive financing package meaningfully enhances our liquidity and strengthens our balance sheet,” Metrick said. “Coupled with the early realization of synergies and improving inventory position, we are primed to execute on our transformation strategy, invest in key growth initiatives, and reinforce our leadership as the world’s largest multi-brand luxury retailer.”
Saks Global announced Dec. 23 that it completed its acquisition of Neiman Marcus Group for a total enterprise value of $2.7 billion, bringing together the luxury retail brands Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue and Saks Off 5th.
