S&P World Rankings has downgraded its issuer credit standing on Saks World Enterprises from “CCC+” to “CC,” saying the posh retailer’s proposed $600 million financing transaction that was introduced June 27 is “tantamount to a default.”
The financing bundle features a debt trade and a re-tiering of its excellent senior secured notes, with a deliberate trade of its notes at a reduction to par, S&P World Rankings mentioned in a Tuesday (July 8) weblog put up.
“The noteholders will obtain much less worth than they have been initially promised and can rank decrease by way of precedence than the brand new cash notes following the completion of the transaction,” the weblog put up mentioned.
S&P World Rankings additionally mentioned within the put up that Saks World has confronted a deterioration in its working efficiency and liquidity challenges as a consequence of disruption in its stock circulation; a decline within the availability beneath its asset-based lending facility as a consequence of overdue funds, borrowing base constraints and seasonal stock constructing; and a free working money circulation deficit of $517 million in 2024.
“We imagine the corporate’s market place will weaken as rivals with better monetary capability broaden their enterprise operations,” the put up mentioned.
Saks World didn’t instantly reply to PYMNTS’ request for remark.
Retail Dive reported Wednesday (July 9) {that a} Saks World spokesperson mentioned the ranking replace “is frequent and anticipated with transactions like these.”
“You will need to observe that there will likely be no default beneath Saks World’s present settlement on account of the transaction,” the spokesperson mentioned, per the report. “Importantly, this has no impression on our operations, and we stay assured in our skill to ship for our stakeholders given this financing bundle, accelerated synergy realization, and enhancing stock flows.”
When asserting the financing bundle in a June 27 press launch, Saks World Working Group CEO Marc Metrick mentioned it displays the corporate’s bondholders’ continued confidence within the enterprise and its strategic path.
“This complete financing bundle meaningfully enhances our liquidity and strengthens our stability sheet,” Metrick mentioned. “Coupled with the early realization of synergies and enhancing stock place, we’re primed to execute on our transformation technique, spend money on key progress initiatives, and reinforce our management because the world’s largest multi-brand luxurious retailer.”
Saks World introduced Dec. 23 that it accomplished its acquisition of Neiman Marcus Group for a complete enterprise worth of $2.7 billion, bringing collectively the posh retail manufacturers Neiman Marcus, Bergdorf Goodman, Saks Fifth Avenue and Saks Off fifth.
