Saks Fifth Avenue at crossroads, facing creditor and vendor unease

Six months after acquiring Neiman Marcus, the company that owns Saks Fifth Avenue continues to try to shore up its finances, reestablish trust with suppliers and convince investors and consumers that a $2.7 billion deal to buy a longtime rival was worthwhile.

The combined company - Saks Global - is also trying to assure bondholders that the tie-up they helped fund puts the luxury giant on firmer financial footing.

The latest test came Monday, the due date for an initial $120 million interest payment to creditors, tied to a $2.2 billion, five-year bond issue that Saks used to finance the Neiman Marcus deal. Saks made the payment on time, according to a source close to the company, despite jitters among some investors leading up to the deadline.


Efforts to strengthen the privately held company's balance sheet continue. On Friday, Saks said it had reached a deal with its existing bondholders for $600 million in new financing commitments. The agreement will increase the company's liquidity and reflects creditors' "continued confidence in our business and strategic direction," Saks CEO Marc Metrick said in a statement.

Saks executives have long promoted the Neiman Marcus deal - which includes Bergdorf Goodman - as a so-called transformative event that could remake and strengthen the luxury retail sector in the United States. A combined company would reduce costs and bolster the department store brands.

Still, Saks' challenges run much deeper than making one interest payment, retail analysts said. In May, S&P Global Ratings put Saks on negative credit watch over concerns about its liquidity. On a call with creditors, Saks said it had an adjusted loss of more than $100 million in the last fiscal year, which ended February 1.