Saks Rescue Financing: $400M Approved – US Court Update

A U.S. bankruptcy judge granted preliminary approval for Saks Global‘s bankruptcy financing on Wednesday. This means that the department store group can access $400 million in fresh funds despite an objection from its feuding business partner Amazon.

U.S. Bankruptcy Judge Alfredo Perez approved the financing at a hearing in Houston. The judge explained that the capital provides the company with the necessary leeway to stabilize ongoing operations and advance the restructuring of debts. Mark Weinstein, Saks’ chief restructuring officer, said the company would no longer be able to operate without the new funds. The money will primarily be used to settle supplier invoices and to pay around 17,000 employees.

Saks filed for bankruptcy protection late Tuesday with liabilities of $3.4 billion. After the failed merger with Neiman Marcus, the company ran into significant liquidity problems, which made it difficult to reliably supply the branches with goods. Saks lawyer Debra Sinclair emphasized that all stores remained open. There are no indications of weaker customer demand.

“The customers are there – whenever goods are available, they sell,” said Sinclair. “The real problem is that we have recently not been able to purchase enough goods to meet demand.”

The now released financing of 400 million US dollars is part of a total financing package of 1.75 billion US dollars.

Before the decision, Judge Perez rejected Amazon’s objection. The online company had stated that its equity stake in Saks of $475 million would effectively be devalued under the current financing structure.

Amazon has little confidence in Saks’ successful turnaround, said corporate lawyer Caroline Reckler. Amazon also argued that the new loan improperly used the Saks Fifth Avenue flagship in Manhattan as collateral. The property value has already been used to secure payments of up to $900 million as part of the “Saks on Amazon” cooperation.

In addition to financing, the court approved several standard motions to maintain business operations during the bankruptcy process. This includes permission to pay back payments to suppliers who supplied Saks before filing for bankruptcy protection. According to the company, liabilities to so-called critical suppliers amount to more than $337 million, including $136 million to Chanel and $26 million to Gucci owner Kering.

Saks has been a household name in US luxury retail for decades, particularly among wealthy customers. However, the company has not fully recovered from the cuts during the Covid-19 pandemic. Competitive pressure from online providers increased, while many luxury brands expanded direct sales through their own stores. After Saks defaulted last year, suppliers began withholding goods.