Updated 4 p.m. ET March 16
Saks Global has a plan — and the bondholders supporting the company through its bankruptcy approve.
The luxury retailer unlocked access to an additional $300 million of the $1.75 billion in committed capital it secured in January when filing for a Chapter 11 restructuring. To unlock access to those funds the company received approval of its five-year business plan from a group of senior secured bondholders and hit other milestones. Now the court has to take a look.
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The new money comes on top of the $825 million the company has already been given access to. Saks Global will get access to the rest of the funds after it emerges from bankruptcy, which is expected to happen later this year.
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Saks Global said it has “sufficient liquidity to continue to support operations and advance its transformation as it focuses on serving luxury customers, strengthening brand partner relationships and driving full-price selling.”
The five-year plan will be filed with the court in the coming weeks, but the company is already made big changes that illuminate much of its future.
As was expected, Saks Global used the bankruptcy to trim down and is in the process of shuttering 20 Saks Fifth Avenue stores, four Neiman Marcus doors, 57 Off 5th locations, all five Last Call clearance centers and the Horchow catalogue.
The company is also winning its way back into the good graces of key vendors, with 600 brands releasing $1.4 billion in retail receipts to Saks Global, increasing merchandise receipts by nearly 60 percent so far this month, compared with a year earlier.
And the supply chain is getting tightened up and three distribution and service centers — in Texas, Pennsylvania and California — are being prioritized.
Geoffroy van Raemdonck, who took the reins as chief executive officer of Saks Global when it started the restructuring, said in a statement: “We have made significant progress over the past two months as we work to position Saks Global for the future, quickly stabilizing our business, improving inventory flow and investing in our transformation.
“With continued strong support from our capital partners, we are laying the path to realize the combined full potential of our three banners, achieve double-digit adjusted EBITDA margin and drive profitable and sustainable growth. As we continue to secure a bright future for Saks Global, guided by our relentless devotion to the luxury customer, we are focused on delivering an expertly curated assortment and personalized service across Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman.”
Last week, van Raemdonck told WWD that the process has been moving faster than he anticipated.
“What the business plan will show is that we have a plan of action to drive sales, to grow from a smaller footprint, and to be significantly more profitable,” van Raemdonck said. “It is also going to demonstrate that we have ample liquidity to operate and fund the business, as well as generate free cash flow to invest in the business over the next five years. That’s what this business plan will be detailing.
“Yes, we had a problem of liquidity,” van Raemdonck said. “It led to a problem of inventory and performance. That was the summary of last year. The summary of this year is we are through a financial restructuring that gives us access to liquidity and allows us to refocus the business on the most valuable assets we have, and when we emerge later this year, we will be able to perform at the level we want.”
David Banker, an attorney representing creditors in the case, said it was a good sign to see Saks Global gain access to additional financing, in part because it signals confidence among the lender base. “Throwing in another $300 million isn’t pocket change,” Banker said. “You’d like to believe that they truly are convinced that this is real and this could result in a good outcome.”
That’s a little extra reassurance that, although bankruptcies don’t always go as planned, Saks Global is moving in the right direction.
“When I see cases fail, it often happens quick because they don’t get enough vendor support and the lenders aren’t willing to put enough in,” he said. “And then there’s just not enough inventory.”
That does not appear to be the case at Saks Global.
The new money was accompanied by a raft of court filings that start to detail the nitty gritty of the business, giving more detail on the state of the company’s finances before and after the filing.
One filing details payments Saks Global made in the 90 days before sinking into insolvency. Chanel, for instance, received $50.5 million in payments over that time period. Still that wasn’t enough to cover all of the retailer’s bills with the brand, which ranked as the company’s top unsecured creditor, owed $136 million.
Some of the key filings are still under seal, but a fuller picture of Saks Global is starting to come into the light.
“The filing of schedules and statements of financial affairs is the moment when the bankruptcy case really becomes transparent,” Banker said. “The debtor has to disclose, under penalty of perjury, what it owns, what it owes, who its creditors are and what major financial transactions occurred before the filing. For creditors and the market, it’s often the first comprehensive snapshot of the company’s financial condition.”