Saks Global walks a narrow road

Where does Saks Global go from here?

Although the fashion year began with how Saxophone integrated Neiman Marcus and paid back its past bills to pay, last month’s attention shifted to US President Donald Trump’s dramatic ratings in tariffs.

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The trade war has at least cooled down, but the uncertainty of Saxophone has begun to recover.

Saks plans to pay suppliers a slower plan and a one-year schedule to pay for payments to begin in July sparked turmoil in February.

This time, bondholders have attracted attention and are driven by questions surrounding the company's $120 million interest payments payable on June 30 to fund Neiman's deal.

Saks is more clear than ever that bond transactions are priced below 48 cents, although it is actively working to strengthen its balance sheet and is often believed to be ready to pay interest payments.

But the market is closely monitoring the company's financial situation, but it is not safe.

"The company is a cash incinerator," said a debt analyst. "It was not well structured in December, and now things are bad. They can't ship freight until February starts to accelerate their core suppliers. They can do it with it, but they don't have much buffering. These synergies (combining SAKS and NEIMAN costs are reduced), but they don't realize their costs, but they have realized their costs."

This is a fast moving situation, as SAKS may change a dime when working towards a more stable liquidity structure.

Last week, S&P said it could lower its "CCC Plus" rating, "can set up to two gaps over the next few weeks to months."

The credit regulator cites “how companies will correct uncertainty in their current liquidity positions” and says retailers may face “additional challenges in building seasonal inventory.”

Bondholders, industry experts and analysts believe SAKS is moving forward with as many as four different paths, which are said to end up with liquidity of $350 million to $400 million.

Saks has been talking about making $300 million in its $1.8 billion asset-backed loan, but many market observers believe the company has also reached deals with bondholders, gaining enough swing space and more liquidity to spend Christmas. If the holidays prove strong and the business is promising - Finger Cross - Saks can find the way forward based on these results.
The luxury retailer already has a relationship with Jamie Salter's real brand group, which could step in more SAKS, perhaps as part of the company's intellectual property, or more access to the entire Saks, Neiman's and Neiman's and Bergdorf Goodman.
Amazon has just built the Saks Storefront, leveraging some long-time designer brands – can ride in rescue. A keen fashion observer calls it the scene of Hail Mary.
Then the industry is thinking, but not talking about it, even if credit reports and liquidity both show that it is a possibility - next month the bond missed interest and freedom fell into bankruptcy.

The good news is that at least for now, outside experts have not seen anyone benefit from bankruptcy, especially since Neyman’s deal is still in the six-month rebate period, and technically the court may unwind.

Saxophone and bondholders are actively working with experts to help companies promote liquidity efforts. Sachs declined to comment on this article, but is said to work with Willkie Farr & Gallagher and Kirkland & Ellis, Bank of America, PJT partners and financial advisers at the law firm. Bond holders are said to have hired Lazard as financial adviser and law firm Weiss.

Sax is said to have $120 million to pay interest payments and intends to make payments when exploring options that suddenly strengthen liquidity in the world of tariffs and mix economies.

"In terms of the lack of interest payments on bonds, they stressed that it would be sure it would be made on time. We'll see, but I believe it was their intention. I've also been told that Filo can also be closed for about two weeks. We'll see, too."

Most importantly, Vasner said: “They pay us weekly and we are still approving the order.”

Hilldun is a key partner of Saks, working with more than 140 brands sold to Saks or Neiman or both, and guaranteeing payments for goods.

Saxophone on Amazon, red dress. — Saxophone on Amazon.

Tim Hynes, head of credit research at Global Debt Line, said a group of investors holding Saks bonds are working together and “are considering providing new financing of $200 million to $250 million depending on improving its position in the capital structure.”

If the Filo facility is also implemented, the company may have over $500 million in experience.

However, there are still many problems that make the process more specified.

Sax has not given any audited financial reports to bondholders in the past three quarters. "It's unusual," the debt analyst said. "Not that, you'd assume the worst."

The retailer is considering selling some of its real estate to raise funds, but bondholders are trying to detect how much Saks' real estate portfolio is really worth. It's fixed at $4.4 billion, but it may be less than it if it has to be sold quickly. Some investors who have the opportunity to earn 11% on SAKS bonds may also jump too fast and do not realize that the company's famous Fifth Avenue flagship store is not against debt, but rather has a lien on the equity in the company that owns the store, which makes the main real estate even further away.

Then there are other obligations from Saxophone - whispering that the company still owes Nieman's former owner to the acquisition, which is debt, and if something goes wrong, it could have a place in front of bondholders.

Sax also said to have promised Amazon to pay $800 million in five years, and if the mark is missed, it will be attributed to the difference between the e-commerce giants, although it seems to be a focus on the future given the company’s rapid growth in the company.

Saks' executive chairman Richard Baker toured with Salter last week in London.

Baker said the company cut 500 to 600 players from its supplier base, including 2,660 brands, as expected.

“We have to get the supplier matrix right,” he said, adding that retailers have too many brands and are not suitable.

“We have to reset expectations for supplier relationships,” Baker said.

Saks estimates $9 billion in retail sales, including the total merchandise value of online sales, and hopes to do more through a "controlled brand" operated by partnerships.

"If I could bring our mix to 20% of the controlled brand and with greater profits and Salter's ownership status, it would be a huge win for us, and a more conservative and proper cash flow," Baker said in Congress.

Salter added: "You need 20% of $9 billion, that's $1.8 billion. He's going to make 25% on the product. That's almost $400 million change. That's why this relationship is so crucial."

The math is just part of the Saks big luxury reset – the program is now leading the way as the company not only puts new payment terms into practice, but also aims to cut millions of dollars in costs due to the merger of Saks and Neiman.

This is a lot of internal turmoil when it is full of external turmoil.

Apart from competing with the trade war, Saks and Neiman must stick to their own positions as Bloomingdale seized its capabilities and as big luxury brands continue to expand with their own stores.

The conversation might be about funding SAKS now, but it still has to be a retailer.

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