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Wed, May 14, 2025, 9:46 AM 5 min read
Standard & Poor’s has Saks Global under the credit microscope.
The debt watchdog put the luxury retailer’s “CCC-plus” rating on creditwatch negative due to the company’s “less-than-adequate liquidity” as well as “the uncertainty of how the company will remedy its current liquidity position.”
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S&P said the company’s finances will “likely lead to additional challenges in building seasonal inventory while executing on its synergy initiatives from its acquisition of Neiman Marcus.”
A “CCC” rating means the debt is “currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions.”
Saks purchased competitor Neiman Marcus for $2.7 billion in December — with help from Amazon and Salesforce and an eye toward forging a luxury powerhouse both online and off.
To get there, the business is being reset and looking to reverse sales declines. Revenues at the Saks banner fell 20 percent last year due to “disrupted inventory flow” while Neiman Marcus was down 2 percent, according to S&P.
To close the Neiman’s deal, Richard Baker, executive chairman and architect of the acquisition, sold $2.2 billion in junk bonds paying 11 percent interest in December.
While that looked good then — the debt offering was upsized from $2 billion due to demand — the bloom has come off the rose and the financing has started to look even more aggressive given the uncertain retail environment.
Saks chief executive officer Marc Metrick said late last month the company was looking to bolster its balance sheet, exploring the possibility of carving a $300 million FILO facility out of the existing $1.8 billion asset-backed loan. Financial advisers Bank of America and PJT Partners as well as law firms Willkie Farr & Gallagher and Kirkland & Ellis have been brought on board to help.
“I’ve got a big plan for transformation, I’ve got to invest in that transformation,” Metrick told WWD at the time. “I’ve got to be a strong counterparty to my brand partners and we’re seeing a turbulent market. There’s a lot of unknowns with what could happen, and I’m further fortifying my balance sheet. That’s what I’m doing.”
S&P said the proposed FILO facility would give the company additional flexibility and some short-term liquidity relief, but that “we estimate incremental annual interest expense will further depress [the free operating cash flow] deficit going forward.”
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