Normal & Poor’s, in a transfer that was largely anticipated, on Friday downgraded Saks International.
The scores company downgraded Saks International to “selective default” from “CC” and its issue-level score on notes issued in December 2024 to ‘D’ (default) from ‘CC.’ S&P has been involved about Saks’ liquidity, income declines, overdue funds to distributors, and stock shortages.
Whereas being downgraded shouldn’t be a very good search for Saks, S&P’s anticipated transfer is considered as extra of a technicality that shouldn’t have any tangible impression on the retailer’s operations or close to future financing potential.
The downgrade comes within the aftermath of Saks International finishing its debt restructuring on Aug. 20, which included the alternate of notes issued in December 2024 used to finance Saks’ $2.7 billion acquisition of the Neiman Marcus Group.
Referring to the debt restructuring, S&P acknowledged, “We view the transaction as tantamount to a default as a result of it included a debt alternate at a reduction and the re-tiering of its excellent senior secured notes issued in December 2024,” which suggests sure collectors have been deprioritized. “Subsequently, we lowered our issuer credit standing on Saks International to ‘SD’ (selective default) from ‘CC’ and our issue-level score on its notes issued in December 2024 to ‘D’ (default) from ‘CC’,” which is already a really low score suggesting an organization’s vulnerability.
“As a part of the alternate transaction, the corporate has acquired new cash totaling roughly $600 million from collaborating lenders, enhancing its liquidity place,” S&P acknowledged. “We view the transaction as tantamount to default due to the corporate’s weakening liquidity place main as much as the transaction and free working money circulate deficit. Moreover, preliminary senior secured be aware lenders are getting lower than initially promised because of the beneath par debt alternate, which resulted in an total low cost of about $115 million in contrast with pre-transaction quantities and the re-tiering of its place within the capital construction…We anticipate incremental annual curiosity bills will signify an extra hurdle to the corporate’s potential to generate free working money circulate.”
Nonetheless, S&P additionally indicated that it’ll consider the corporate’s revised capital construction and its latest strategic initiatives “when we now have adequate data on the go-forward capital construction and anticipate to boost the issuer credit standing to the ‘CCC’ class at the moment.” That ought to occur very quickly.
S&P expects that Saks International will use the $600 million to rebuild its stock place, which has been depleted attributable to sure distributors both discontinuing or decreasing shipments. S&P additionally expects the cash might be used to pay the retailer’s distributors and put money into synergies from the Neiman’s acquisition.
Responding to the downgrade, a Saks International spokesperson mentioned, “This replace was anticipated following the shut of our latest transaction, by which we secured $600 million in financing from present bondholders. You will need to be aware that these score actions apply to the notes issued in December 2024, and to not the brand new notes issued in August 2025, that are at the moment unrated.
“S&P expects to improve its score because it learns extra about our new capital construction and go-forward strategic initiatives,” the spokesperson added. “There isn’t a default beneath Saks International’s present agreements, and the score has no impression on our operations. We stay assured in our potential to ship for our stakeholders.”
Along with the debt restructuring, Saks International’s liquidity place ought to enhance as a result of the corporate is working exhausting to seize synergies via the addition of NMG into its portfolio, involving consolidating varied features and layoffs to scale back prices. Saks International expects to scale back annual prices by $600 million throughout the subsequent few years.
