Saks Launches Debt Swap After Seeking Minority Lender Deals

Saks Global Enterprises has launched a debt exchange following weeks of negotiations with creditors as its $600 million fresh financing takes shape, according to a Monday statement. 

The struggling retailer has proposed swapping all of its $2.2 billion in 11 percent bonds due in 2029 for a combination of securities with the same interest rate and maturity, but lower principal. The new debt would be a mix of senior secured asset-based notes issued by a special purpose vehicle, along with two tiers of notes lower on the capital structure issued by Saks Global. Much of the new debt would be further down Saks’ repayment ladder if the company goes bust.

Creditors will get different securities based on their participation in the deal. For instance, so-called “pre-funded participants” won’t take a haircut, Bloomberg previously reported. For every $1,000 in principal, they will receive $106 of asset-based notes and $894 of so-called second-out notes.

As part of a $600 million deal the luxury retailer agreed to on June 27, Saks immediately got half of the fresh financing from an ad hoc group of bondholders that own a slim majority of its 11 percent notes, Bloomberg previously reported. 

Saks has been working to raise the other half of the financing and discussing the terms of the exchange with its minority creditors, Bloomberg reported earlier. Those bondholders would take losses and trade their outstanding notes for new securities that are lower on the capital structure. The majority holders would bridge any shortfall in fundraising for the second $300 million.

Investors who don’t participate in the exchange will see their debt fall to the bottom of Saks’ capital structure and lose creditor safeguards known as covenants. 

By Dorothy Ma and Reshmi Basu

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S&P Cuts Saks’ Credit Rating Over New Financing Package

The luxury retailer’s credit rating is now CC — 10 rungs beneath investment grade — a demotion that ‘reflects our view that the proposed financing transaction is tantamount to a default,’ S&P said.