Article
Saks Global Seeks Potential FILO to Boost Liquidity
Reporting: Harvard Zhang
Saks Global is in the market for a potential first-in, last-out, or FILO, loan under the ABL facility to boost liquidity, as the luxury department store chain faces tensions with its vendors and consumer demand uncertainties amid trade disruptions, according to sources.
The $1.8 billion ABL revolver is led by Bank of America.
Saks acquired Neiman Marcus at the end of last year using $1.544 billion of investor equity and an ABL as well as $2.2 billion of 11% secured notes, which last traded in size at 72.25 today, compared with 81.375 on April 1 before President Donald Trump’s “Liberation Day,” according to TRACE. The bonds’ price had been drifting lower since mid-February.
Both Saks and Neiman Marcus experienced comparable sales declines, in addition to high pro forma leverage and historical cash burn, according to analysis by Octus, formerly Reorg. It is of particular concern that the two department store chains have seen their top lines deteriorate in what has generally been a resilient luxury retail space.
The company marketed its December 2024 financing on a pro forma run-rate LTM adjusted EBITDA of $707 million, which included $345 million of synergies in addition to other major addbacks such as $127 million for “inventory flow adjustment,” though the magnitude of adjustments brought into question the true earnings potential of the business and its ability to delever from elevated levels.
However, the combined companies’ real estate portfolio may provide some comfort to investors, even though some valuable stores and land are not included in the secured notes’ collateral.
Saks has been laying off workers to cut costs, according to a press report.
Saks did not respond to a request for comment. Bank of America declined to comment.
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