NEW YORK, June 5 (Reuters) – Saks Global received court approval for its bankruptcy restructuring on Friday, clearing the luxury retailer to exit from Chapter 11 with a smaller store footprint and lower debt.
U.S. Bankruptcy Judge Alfredo Perez approved the company’s Chapter 11 plan at a court hearing in Houston, Texas, saying the company had done an “extraordinary” job in stabilizing its business after a rocky start to its bankruptcy in January.
The restructuring will wipe out the company’s equity and hand control over to its senior lenders.
Saks Global’s bankruptcy plan will allow it to cut most of its pre-petition debt and emerge as a smaller company, after it used its bankruptcy to repair relationships with luxury brand vendors, close off-price retail stores and shut more than half of its Saks Fifth Avenue stores.
The company will emerge with 49 luxury retail locations, including 33 Neiman Marcus stores, 15 Saks Fifth Avenue stores, and Bergdorf Goodman. Saks Global entered bankruptcy with 33 Saks Fifth Avenue locations.
Saks Global CEO Geoffroy van Raemdonck said in a Friday statement that restructuring leaves the company “well positioned to define the future of luxury retail.” Saks Global expects to emerge from bankruptcy within weeks.
Under the restructuring deal, senior lenders are set to take control of Saks Global after providing $1 billion in new funding through the bankruptcy and pledging an additional $500 million after the company exits Chapter 11.
Saks Global won the support of its junior creditors by agreeing to set up a litigation trust, with $20 million in initial funding, to pursue lawsuits in hopes of gaining more money for creditors. The junior creditors, who are owed about $1.5 billion collectively, would likely get no recovery without the litigation trust, according to court filings.
Saks Global filed for bankruptcy on January 13 with $3.4 billion in debt, after its ill-fated merger with Neiman Marcus caused cash shortfalls that prevented it from reliably replenishing inventory at its stores and strained its relationship with critical vendors like Chanel, LVMH and Kering.
(Reporting by Dietrich Knauth; Editing by Alexander Smith and Cynthia Osterman)
