Saks Global Enterprises’ debt has sunk to new lows in recent days as the luxury retailer faces a more than $100 million interest payment deadline at the end of the month amid sales declines and troubled vendor relationships.
A portion of its first-lien debt subordinated to other lenders was quoted at about 12 cents on the dollar on Friday, down from around 30 cents on Monday, according to broker runs viewed by Bloomberg. The so-called ‘second-out’ portion of the bonds was put in place as part of a June debt overhaul aimed at alleviating the firm’s ongoing financial struggles.
The more senior debt was quoted at around 60 cents on the dollar Thursday, according to the runs. Saks owes more than $100 million in interest payments on its bonds by the end of this month, according to debt terms.
The selloff comes amid mounting fears that the company’s cash reserves and relationships with suppliers are under pressure amid a lacklustre retail environment, according to people familiar with the matter who asked not to be identified discussing private information. In October, the firm slashed full-year guidance and reported declining sales, citing challenges managing the flow of inventory.
Lenders in the company’s most senior debt have been working with boutique advisory firm M3 Partners to help ward off any potential losses on their loan, separate people familiar with the matter said.
Representatives for Saks and M3 didn’t respond to requests for comment.
The chain, which operates its flagship Saks Fifth Avenue stores along with Bergdorf Goodman and Neiman Marcus, reported a 13 percent year-on-year drop in revenue to $1.6 billion in the second-quarter due to inventory challenges. At the time, management also said it’s been exploring the sale of a minority stake in department store Bergdorf Goodman to raise funds.
By Reshmi Basu and Eliza Ronalds-Hannon
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Saks Is Exploring Options for Bergdorf Goodman, WWD Reports
The company is looking to sell a minority stake that would value Bergdorf Goodman in the range of $1.5 billion to $2 billion.