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Saks Teeters on Bankruptcy After $2.2B Debt Splurge
12 Jan
Summary
- Saks took on $2.2 billion in debt for a merger, leading to financial struggles.
- The company missed a $100 million interest payment in late December.
- Competition and past debt have pushed Saks toward a potential bankruptcy.
Saks Fifth Avenue, a historic luxury retailer, is currently teetering on the brink of bankruptcy. The company's financial woes stem from a substantial debt load, primarily incurred in 2024 when it acquired Neiman Marcus and Bergdorf Goodman. This strategic move saddled Saks with an additional $2.2 billion in debt, which S&P subsequently rated as junk.
Following the merger, Saks experienced a rapid decline in its financial standing. Vendor payments became overdue, and designer brands reduced their offerings in Saks stores. The situation worsened last summer with the issuance of more debt, which failed to alleviate underlying problems. Sales continued to fall as brands halted shipments and customers faced refund delays.
In late December, Saks missed a critical $100 million interest payment. This default has intensified concerns among senior creditors regarding the robustness of existing bond covenants. The retailer's struggles highlight the risks associated with excessive debt accumulation, particularly in a competitive retail landscape, and serve as a cautionary tale for investors.
