(Bloomberg) — Saks International Enterprises has reached a $600 million debt cope with a variety of its current lenders that might drive some collectors to simply accept losses and push them again within the reimbursement precedence line.
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As a part of the advanced association, a bunch holding a slim majority of the struggling luxurious retailer’s $2.2 billion of 11% bonds, which have been simply issued in December, will present Saks a direct $300 million mortgage, in accordance with deal phrases reviewed by Bloomberg. That debt can be among the many first repaid if the corporate goes bust. The retailer operates its flagship Saks Fifth Avenue shops together with Bergdorf Goodman and Neiman Marcus, rival chains it bought final 12 months.
Lenders that aren’t a part of that group may have the choice to assist present as a lot as $300 million of extra debt. That might be a part of a debt change that might see the lenders swapping their excellent notes for a lesser quantity of latest, decrease precedence securities with the identical rate of interest, a 2029 maturity and collateral.
The bulk holders — who would bridge any shortfall within the second $300 million — will even take part within the swap however received’t need to take a so-called haircut as a part of the transaction. Traders who don’t participate within the change will see their debt fall to the underside of Saks’ capital construction and lose creditor safeguards referred to as covenants, in accordance with the deal phrases.
A consultant for Saks International declined to touch upon the phrases of the financing. The corporate confirmed the deal in a press release Friday with out disclosing particulars of the debt swap.
Simply six months in the past, buyers scooped up the $2.2 billion of notes that are actually a part of the debt swap with the intention to finance Saks’ takeover of Neiman Marcus. That debt tumbled to a file low 34.5 cents on the greenback Thursday after Bloomberg reported preliminary particulars of the change, in accordance with the bond-price reporting system referred to as Hint. Saks plans to make its upcoming curiosity cost on the notes — about $120 million due June 30.
The transaction is the newest occasion of a debt deal pitting collectors in opposition to one another with the intention to rating respiratory room for a troubled firm — and its fairness stakeholders. Saks’ majority collectors have been suggested by Lazard Inc. and Paul Weiss Rifkind Wharton & Garrison, whereas minority collectors have been represented by Greenhill & Co. and Glenn Agre Bergman & Fuentes.
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