Leveraged luxury: fall of Saks Global to scorch US business stars – Financial Times

In December 2024, some of the biggest names in business backed an audacious multibillion-dollar deal to combine two gilded US department store chains, Saks and Neiman Marcus.

The likes of Amazon and Salesforce believed they were writing a new chapter for a beleaguered sector, relying on technology hype, merchandising savvy and prestige branding. Driving the vision was Richard Baker, an American billionaire real estate investor.

Thirteen months later, that once gleaming edifice known as Saks Global — which includes dozens of Saks and Neiman Marcus stores scattered across America as well as two marquee Bergdorf Goodman locations near Central Park — is on the brink of collapse. 

The group is expected to file for bankruptcy as soon as this weekend under a crushing debt load and facing the wrath of vendors who are awaiting payment for cashmere sweaters and shearling coats already shipped to stores. Just last June, Saks had raised $600mn in fresh capital. It has burned through that sum in six months.

At the moment, large debt funds and opportunistic investors including the likes of Pimco, Pentwater Capital and Bracebridge Capital, are competing to provide a bankruptcy loan that may exceed $1bn. Still, some parties involved warn that even with an infusion that big, it may not be enough to prevent a Saks reorganisation from falling into an outright liquidation — destroying venerated brands and a shopping empire that represent the crown jewels of American luxury retail.   

Regardless of who funds the bankruptcy loan, billions of dollars of investor capital is expected to be wiped out in one of the most shocking and rapid corporate blow-ups in recent memory, to the embarrassment of some of the most successful businesspeople in the world.

Baker’s Hudson’s Bay, the Canadian department store chain, bought Saks in 2013 for $2.9bn, a takeover widely viewed as a bargain as the flagship Saks store on Fifth Avenue in Manhattan was shortly thereafter appraised at nearly $4bn by itself.

Neiman Marcus had less luck. The Dallas-based chain was acquired by private equity firm Ares Management and the Canadian pension plan CPPIB for $6bn in 2016 but filed for bankruptcy in 2020. It eventually passed to its creditors, which included Pimco.

When Saks called Neiman Marcus with an all-cash buyout, funded by selling more than $2bn in bonds, it seemed like a bold bet on physical retail at a time when online speciality merchants had become supreme.

“With data and innovation at our core and a portfolio of prime real estate, we aim to redefine the luxury shopping experience,” Baker said at the time.

Amazon and Salesforce were supposed to help with AI-enabled “cutting-edge personalisation”. Other equity backers included Authentic Brands Group, Rhone, Insight Partners, Abu Dhabi Investment Council and G-III Apparel Group.

Yet soon after the deal closed in early 2025, Saks was having trouble with the basics. One lender who reviewed the financing said Saks was tight enough on initial liquidity that it was quickly forced to stretch payments owed to its vendors. 

“They ended up in a position where they did not have enough inventory or the right inventory and so they were burning cash all the way through,” a second major investor said.

By spring there were worries that Saks would not be able to make the first interest payment on the bond issued the previous December. The company instead executed a complex “uptier” financing that relied on a partial group of existing bondholders to put in another $600mn of cash in a senior position, which dealt creditors not invited to join the deal painful losses. 

The $600mn was meant to be enough for Saks to replenish its bank accounts, giving it enough money to pay off existing vendors and place new orders for the approaching holiday season.

The company brushed off suggestions that it had any financial difficulty at the time, though its chief executive Marc Metrick acknowledged Saks’ newfound “bolstered liquidity position” and “financial flexibility”. 

Even with the fresh money, Saks remained on the back foot with suppliers, unable to fully pay down past-due bills and keeping others on payment plans that it had said would stretch for months. Some suppliers, nervous about Saks’ finances, wanted to be paid when delivering goods — constricting the company’s liquidity. Others stopped shipping to Saks altogether, with one lender describing its store racks as “sparse” and “dangly”. 

Sales continued to weaken. Revenues fell 13 per cent in its financial second quarter, which runs from May to August, according to rating agency S&P Global. That followed declines of 15 per cent and 11 per cent in the previous two fiscal years.

In December, as the company was once again out trying to raise fresh capital from its creditors, it skipped an interest payment on its outstanding debt. Days later, Metrick resigned as CEO after a 30-year run at the group. Richard Baker, the Saks executive chair, has taken over as interim chief. Saks quickly discovered that any new money would probably have to come in the form of a bankruptcy loan.

Traditionally in a bankruptcy, a company’s senior-most lenders will step in to provide a so-called debtor-in-possession loan, which takes priority over all other claims creditors might have against a business. However, with Saks’ prospects weakening, several senior lenders — a group that includes the asset managers MacKay Shields and BlackRock — feared they would be throwing good money after bad, and refused to participate.

“The people who put the new money in [in June] got so smoked,” said one investor who had invested in Saks debt. The new senior bonds issued last summer are now trading below 30 cents on the dollar. 

“Some of the biggest creditors don’t have new money to put in.”

The fight over the bankruptcy loan in recent days has led to a showdown between a couple of groups.

Two funds that led the company’s June refinancing, Bracebridge and Pentwater, stepped in with their own offer for a bankruptcy loan, including about $1bn of new debt and are willing to fund $500mn more when Saks exits bankruptcy, according to people briefed on the matter. 

Other lenders have offered to provide $250mn of liquidity to Saks as part of that package, which together is seen by some as enough to put Saks back on a proper footing.

However, some creditors believe $1bn will not be enough to prop up the Saks business. Saks will also be required to meet certain operating and financial hurdles before the funding is disbursed, which is likely to weigh on suppliers.

Investment group Pimco, which was previously an investor in Neiman Marcus until Saks bought the business, put forth its own competing plan for bankruptcy financing. The firm has offered a $1.5bn loan in the hope that the higher cash amount will win over Saks’ owners. 

However, Pimco is not a current senior creditor and bankruptcy courts typically do not approve bankruptcy loans from outsiders that would jump in priority over existing senior creditors.

Any Saks bankruptcy is expected to be chaotic, given the immediate fight over bankruptcy financing as well as the sharp drop in business and Saks’ complicated capital structure, with both traditional debt and separate property-backed debt.

One person involved in the process said that external lawyers for Amazon had been calling around in recent weeks to quietly gather information about what restructuring options might be on the table for Saks.

Whatever the outcome, investor losses are expected to reach into the billions of dollars with most existing Saks debt and equity investors fully wiped out.

“My clients are sick to their stomach,” said one lawyer involved in the Saks situation.

Additional reporting from Elizabeth Paton, Jill Shah, Amelia Pollard and Arash Massoudi