S&P Global Ratings raised its debt ratings on Saks Global Enterprises LLC following the luxury retailer’s completion of a debt restructuring in August 2025, which included approximately $600 million of new money ($300 million prefunded in June) and an exchange of its $2.2 billion senior secured notes. S&P still has a negative outlook on Saks due to liquidity constraints.
“We believe the capital structure remains unsustainable, and a continued free operating cash flow (FOCF) deficit is likely to pressure liquidity over the next 12 months,” S&P said.
S&P raised its issuer credit rating on Saks Global to ‘CCC’ from ‘SD’ (selective default). At the same time, it withdrew its issue-level rating on the former $2.2 billion senior secured notes following the exchange at the issuer’s request.
The negative outlook reflects that S&P could lower its rating if there is a short-term default risk, as Saks Global struggles to build a sufficient liquidity position while investing to stabilize its operating performance.
S&P said in its analysis, “Our ‘CCC’ rating reflects default risk in the next 12 months without improvement. Saks Global exchanged its $2.2 billion maturity notes for $762.5 million in special purpose vehicle notes ($162.5 million from the exchange and $600 million in new money), issued by SGUS LLC. Additionally, $1.4 billion second-out notes and $441 million third-out notes were issued by Saks Global, all maturing in 2029. A small portion of nonconsenting lenders remained in the existing facility issued in December 2024, with covenants removed and a lower priority in the capital structure. The transaction resulted in a discount of approximately $115 million of the original face value. Saks Global plans to use the proceeds to pay down part of its $1.8 billion asset-based lending (ABL) facility, which had $1.1 billion outstanding as of July 16, 2025; repay vendors; and invest in synergies from the Neiman Marcus Group acquisition.
“While the new capital structure provides a much-needed infusion of cash, we expect liquidity will be rapidly depleted by the investments required to stabilize the business amid a challenging macroeconomic environment. Long-term, the elevated outstanding debt is an additional hurdle to the company’s ability to generate FOCF.
“We expect EBITDA to be lower than interest expenses. Reported FOCF deficit improved to $184 million in the first quarter compared to $197 million in the prior year, driven by a working capital inflow of $74 million. Saks Global has focused on improving working capital management. We expect the company to generate about $500 million of reported FOCF deficit in this year, partially driven by nonrecurring expenses related to the capital structure transaction, acquisition and higher interest expenses. We forecast interest expense of about $400 million over the next 12 months compared to $234 million in fiscal 2024. As a result, we expect the company to continue to heavily rely on its ABL facility. We believe there’s a risk of another default absent significant improvement. We continue to view liquidity as less than adequate despite the financial package.
“In-stock inventory improvement is critical for Saks Global’s competitive position. While the Neiman Marcus Group acquisition meaningfully increased its business operation scale and customer base, continued inventory issues following the COVID-19 pandemic have constrained sales. Revenue increased 78 percent on a reported basis in the first quarter due to the acquisition but decreased 14 percent on a pro forma basis. This follows declines of 15 percent in fiscal 2024 and 11 percent in fiscal 2023 due to a disruption of inventory flow. Saks Global has stretched payables in response to liquidity challenges in the past, which caused vendors to withhold inventory receipts. As part of its turnaround initiatives, the company has focused on improving its in-stock inventory position and working capital management by negotiating longer terms with its main vendors and addressing overdue payments. In addition, the company has capitalized on partnerships with Amazon.com Inc., Authentic Brands Group LLC, Reliance Premium Brands and Salesforce Inc. to leverage asset-light growth.
“We forecast pro-forma revenue will decline 4 percent in 2026 as Saks continues to improve inventory and implement turnaround initiatives. In our view, the company’s competitive advantage will weaken as competitors with more financial capacity increase share, which will require additional effort and resources to re-engage its customer base.
“Saks Global operates in the luxury segment and has exposure to high-income customers, with the top 5 percent responsible for about 50 percent of gross merchandise value, which we view as more resilient. The company has underperformed the industry because of a less-than-adequate in-stock inventory position, despite a loyal following and market position.
“We expect the company to continue to invest in synergies. S&P Global Ratings-adjusted EBITDA margin remained compressed, ending the first quarter at negative 3.1 percent. Saks Global has identified $100 million in additional synergies in the first quarter, now totaling about $600 million, and expects to realize up to 80 percent over the next two years. A large portion of the synergies will come from labor expense. We forecast an adjusted EBITDA margin of 2 percent this year, further improving to 5 percent in 2026 due to synergies and fewer nonrecurring expenses related to the transaction and debt restructuring. While potential cost savings from synergies are significant, we believe liquidity constraints can delay implementation. In addition, we believe operating deleverage will continue to compress profitability if Saks cannot stabilize its business.
“The negative outlook reflects that we could lower our rating if there is a short-term default risk should Saks Global not build a sufficient liquidity position while it invests to stabilize operating performance.”
Image courtesy Saks Fifth Avenue
