Saks Fifth Avenue Secures $500M in Loans to Emerge From Bankruptcy

Saks Fifth Avenue has secured half a billion dollars in financing to stabilize its balance sheet for when it emerges from Chapter 11 bankruptcy.

The retailer, which began reducing its store count to 25 in February as part of the process, announced Thursday that it received commitments from an ad hoc group of its senior secured bondholders amounting to $500 million to use when bankruptcy proceedings end this summer.

Saks said that the financing will go toward shoring up its capital structure and providing liquidity toward long-term investments, while also creating better e-commerce and remote selling operations.

It will also go to improve its inventory at the remaining stores in its portfolio. Saks closed about 28 locations, mostly in suburban markets, as part of an effort to streamline its exposure to urban, luxury clientele.

“As we advance the restructuring process and position Saks Global for the future, our focus remains on strengthening our brand partner relationships, and delivering an expertly curated product assortment and personalized service for our luxury customers across Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman,” Saks CEO Geoffroy van Raemdonck said in a statement.

Saks seems to be moving through the bankruptcy process in a relatively seamless manner.

The department store operator filed for Chapter 11 bankruptcy in January, and a judge granted it permission to get a separate $1 billion loan to pay vendors about a month later.

Despite concerns from suppliers over whether Saks would be able to pay for merchandise already shipped as the bankruptcy went down, the company has managed to secure ongoing commitments from 650 brands that committed to continue providing a supply of goods.

“In a short period of time, we’ve taken decisive actions and made meaningful progress in stabilizing the business and strengthening our relationships with brand partners,” van Raemdonck said. “While it will take time to fully realize the benefits of this progress, our sales and inventory results continue to outperform our internal plans.”

Saks is also examining its employee base to optimize customer relationships.

It’s unclear what the total number of layoffs from the 25 store closures will be, but at more than a dozen of those locations, up to 1,200 employees will be cut loose, the New York Post reported.

Mark Hallum can be reached at mhallum@commercialobserver.com.