S&P Global Ratings lowered the credit ratings of Saks Global Enterprises, LLC as a result of the luxury chain’s $600 million financing package, which includes a debt exchange and the re-tiering of its outstanding senior secured notes.
S&P said it viewed the planned exchange of its notes at a discount to par as “tantamount to a default.” Saks’ corporate credit rating was lowered to ‘CC’ from ‘CCC+’, and the issue-level rating on the company’s notes was reduced to ‘CC’ from ‘B’. The ratings were removed from CreditWatch, where S&P placed them with negative implications on May 13, 2025.
S&P said in its analysis, “The downgrade reflects our view that the proposed financing transaction is tantamount to a default. On June 27, 2025, Saks Global announced it had secured $600 million of committed financing from a group of its existing bondholders. The transaction includes a $400 million first-in, last-out (FILO) asset-based credit facility and additional commitments of $200 million, subject to certain conditions. In addition, $100 million of the new FILO facility will comprise an exchange of its senior secured notes. The noteholders will receive less value than they were initially promised and will rank lower in terms of priority than the new money notes following the completion of the transaction.
“A disruption in Saks’ inventory flow has led to a pronounced deterioration in its operating performance and liquidity challenges. Overdue payments, borrowing base constraints, and seasonal inventory building led to a decline in the availability under the company’s $1.8 billion asset-based lending (ABL) facility to $415 million as of Feb. 1, 2025. In addition, Saks reported a free operating cash flow (FOCF) deficit of $517 million in 2024. We believe the company’s market position will weaken as competitors with greater financial capacity expand their business operations. Management has focused on negotiating longer terms with its main vendors and addressing overdue payments to improve its working capital management. We forecast the company will report negative FOCF over the next two years and continue to heavily rely on its ABL facility. While Saks has real estate assets worth over $4 billion on a net basis, it has been unable to monetize them in a timely manner to meet its financial commitments.
“The negative outlook reflects that, upon the completion of the transaction, we expect to lower our issuer credit rating and issue-level ratings on Saks to ‘SD’ or ‘D’.
“We will lower our issuer credit rating and issue-level ratings on Saks Global to ‘SD’ or ‘D’ if it completes the proposed transaction, which includes the re-tiering of its capital structure and a below-par exchange of its senior secured notes.
“We could raise our rating on Saks Global, likely to the ‘CCC’ category, if it does not consummate the proposed transaction. Under this scenario, our rating would reflect the potential for other restructuring initiatives to address its constrained liquidity.”
Image courtesy Saks
