Luxury retail has always been about the illusion of effortless perfection, but lately, the cracks in the facade at Saks and Neiman Marcus are hard to miss. After a holiday season marred by mounting debt, the recently merged Saks Global may finally be finding some breathing room in the cold four walls of bankruptcy court.
The luxury retailer recently announced that it has gained access to another $300 million of its $1.75 billion bankruptcy financing package, with an ad hoc group of bondholders backing the company’s five-year business plan.
Liquidity meets a leaner strategy
Having filed for Chapter 11 in January with $3.4 billion in debt, the company has used the proceedings to close 20 of its 33 Saks Fifth Avenue stores, concentrating its remaining footprint while working through restructuring.
The new tranche, the company noted, completes its pre-emergence financing package, giving it enough liquidity to keep operations running while it prepares a formal reorganization plan. Saks Global expects to file the plan with the U.S. Bankruptcy Court for the Southern District of Texas within the next several weeks.
Bondholders backing the plan may be a win, too. Their support suggests that at least some of Saks Global’s creditors believe the five-year turnaround is viable, or at least worth backing over the alternative.
On the vendor side of things, the retail chain says shipping has resumed with nearly 600 brands, releasing $1.4 billion in retail receipts. Vendor relationships were one of the more immediate problems when the bankruptcy filing landed, as suppliers pulling back on shipments can accelerate a retailer’s collapse faster than the debt load itself.
Saks Global CEO Geoffroy van Raemdonck, in a recent statement, noted that the business has stabilized over the past two months, with improvements to inventory flow and investment in what he called its transformation.
A reorganization plan still needs court approval, though. The next few weeks will show how much of the five-year vision survives contact with the bankruptcy process.
Sources: PR Newswire, TFL, Reuters