Saks Global’s make-or-break moment has come.
The struggling luxury department store company has a more than $100 million interest payment due on Tuesday, which is necessary to keep it current on the $2.2 billion in debt it took on to buy Neiman Marcus Group last year.
The company might have that cash on hand after recent sale-leaseback deals for the Neiman Marcus stores in Beverly Hills and San Francisco, but sources closely watching the situation wonder if that money will ever get to bondholders.
Instead, financial experts said Saks Global might use those funds to help see it through a bankruptcy filing — although the situation seems to be fluid and the company could also come up with an 11th-hour Hail Mary, like the sale of a stake in Bergdorf Goodman or some more real estate deals.
Sources who have kept in regular touch with Saks Global executives say they have gone into relative radio silence in recent days.
The sale-leasebacks show that there is still value wrapped up in the business, however.
A Saks Global spokesperson said: “We made the strategic decision to sell the land beneath the Neiman Marcus Beverly Hills store and enter into a long-term lease with the new owner. This opportunistic real estate transaction does not impact our day-to-day operations. We remain committed to serving our loyal Beverly Hills customers.”
The spokesperson gave the same statement relating to the Neiman Marcus store in San Francisco.
Saks Global is said to have signed 99-year leases with the new owners.
But 99 years is a long time and the industry — from brands owed money to factors who are not approving new orders to competitors looking for any new advantage — is watching for what happens in the near term.
Typically when companies miss interest payments on their bonds there’s a five-day grace period to make the payment, with a few more weeks after that to find some some solution with bondholders.
In the meantime, Saks and Neiman Marcus stores are open for business, but struggling. The big brands that retain ownership of the inventory through concession shops are said to be doing solid business with the retailer because the shops are fully stocked. But smaller and niche-y vendors have been reluctant to ship the company this year given the retailer’s slowness in paying, leaving it without enough on its floors to regain sales. Saks Global is said to owe vendors anywhere from $500 million to $800 million.
