OVERVIEW

The New Saks Global in Distress Right out of the Gate

The transformative combination of Saks Fifth Avenue and Neiman Marcus (NMG) into Saks Global has rapidly become distressed, and the merger increasingly appears to have been underwritten on optimism rather than defensible economics. The newly issued USD 2.2bn 2029 Senior Secured Notes – a central component of the transaction structure – have traded down sharply to 59, yielding upwards of 27%. Investor concerns center primarily on the company’s worsening liquidity pressures, particularly relating to strained vendor relationships and the growing backlog of trade payables (USD 1.3bn pro-forma as 3 Aug 2024) that demonstrates Saks Global’s deepening dependence on vendor credit as an implicit financing mechanism. The company is also likely facing margin compression related to escalating tariff policies, which could challenge efforts towards achieving aggressive merger synergy targets.