Saks files for bankruptcy a year after adding debt to buy Neiman

Saks Global Enterprises filed for Chapter 11 bankruptcy protection, a humbling turn in a chapter of the iconic luxury retailer’s history marked by mounting losses, flagging turnaround efforts and substantial merger-related debt.

The move comes just over a year after investors handed Saks billions of dollars of new debt to help fund its acquisition of Neiman Marcus, itself a beleaguered luxury retailer that had been through bankruptcy. Within months, though, that debt tumbled to deeply distressed levels, and by the end of 2025, Saks skipped an interest payment to bondholders totaling more than $100 million and was considering seeking court protection.

In Saks’ Chapter 11 filing in Texas, the company said it owed at least $3.4 billion. That debt contributed to a cash crunch, which the company blamed for pushing it into bankruptcy, hampering its ability to keep stores stocked with the high-end goods wealthy customers seek.

Saks is now turning to Geoffroy van Raemdonck, the former chief executive officer of Neiman Marcus, to lead it through bankruptcy and come out as a stronger, less-leveraged business. It filed without a formal restructuring agreement in place, but in a statement said there could be changes coming to its “operational footprint.”

For now, Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman and Saks OFF 5TH stores will remain open, the company said in a statement, adding that it expects to honor all customer programs during the Chapter 11 process. Vendors such as Chanel Ltd., Kering SA and LVMH - collectively owed hundreds of millions of dollars - will be paid on a “go-forward” basis.

“This is a defining moment for Saks Global, and the path ahead presents a meaningful opportunity to strengthen the foundation of our business and position it for the future,” van Raemdonck said in the statement. Van Raemdonck replaced Richard Baker, who stepped down Tuesday.

Saks said it secured about $1.75 billion in bankruptcy financing, including $1.5 billion from a group of the company’s senior secured bondholders. Upon court approval, the $1 billion of so-called debtor-in-possession financing will fund Saks’ operations and turnaround initiatives, while it’ll win access to an additional $500 million of financing once it exits Chapter 11, which it expects to happen later this year.

The road to such a deal grew contentious at times in recent weeks as lenders grew frustrated with the company and its management team. Baker, a longtime real estate investor and key architect of Saks’ Neiman Marcus acquisition, was announced as the company’s new CEO less than two weeks ago, succeeding Marc Metrick.

Watershed Moment

The bankruptcy is a watershed moment for Saks, which traces its roots back more than 150 years. Its flagship location on New York’s Fifth Avenue opened in 1924, when the stretch of now-prime real estate was largely residential. The business expanded from coast to coast in the ensuing decades, becoming an entry point to high fashion for many Americans, and went public for the first time in the mid-1990s.

But the company has struggled to adapt to shifts in the industry as the luxury brands it offers in its department stores also market directly to consumers. The retailer had been negotiating a restructuring with creditors and weighing other ways to shore up liquidity, including raising emergency financing or selling assets, yet ultimately landed on a Chapter 11.

Saks denied that it was succumbing to the same decades-long trends that have pushed so many other retailers into bankruptcy. For years, chains have blamed online shopping, falling foot traffic and a surplus of money-losing stores for their woes.

Saks “is not a declining brick-and-mortar business,” the company’s chief restructuring officer Mark Weinsten said in a court filing.

Weinsten blamed liquidity problems that made it difficult to buy enough inventory to meet customer demand. “Where product is available, performance has remained robust,” he said.

Quick Demise

Saks’ demise happened quickly. It was only in June that creditors tacked on hundreds of millions of dollars of additional debt financing in an effort to shore up its balance sheet, part of a deal that reorganized which lenders get paid out first.

The deal created multiple tiers of bondholders, each with different claims on the company’s assets. Saks’ asset-backed lending facility was also amended to require the company to maintain a minimum amount of excess liquidity, but the company has underperformed since then.

The providers of the new money in bankruptcy may also be able to roll up certain of their existing bonds into the new facility, according to a court filing on Wednesday.

Saks cut its full-year guidance in October after reporting declining sales tied to inventory-management challenges, and a 13% year-over-year drop in revenue to $1.6 billion in the second quarter.

In the court filing, Weinsten, the chief restructuring officer, said that the financing raised over the summer proved to be insufficient to repay the money they owed trade partners, or restore inventory flows to planned levels ahead of the holiday season. This not only affected the top line, but also constrained the company’s ability to access its asset-backed lending facility.

“The truth is that Saks Global put itself in a financially precarious position that undermined the day-to-day operations of the business,” said Neil Saunders, managing director at GlobalData, a research and consulting firm. “A lack of cash meant suppliers went unpaid, this created inventory gaps which then drove customers away.”

Eventually, at the start of January - a low point in the season for sales - the company faced a “perfect storm” of liquidity challenges, according to the filing.

BLOOMBERG