What: Saks Global receives three-notch credit rating downgrade to CC as its complex USD 600 million financing arrangement is viewed as equivalent to default by S&P.

Why it is important: The downgrade highlights the mounting challenges facing consolidated luxury retail, where even substantial real estate assets worth USD 4 billion cannot offset the pressures of managing vendor relationships and debt obligations in today's market. S&P Global Ratings has downgraded Saks Global Enterprises LLC's credit rating by three notches to CC, placing it ten rungs below investment grade.

This significant downgrade follows the announcement of a USD 600 million financing package that includes a debt exchange, which S&P views as tantamount to default. The complex arrangement involves a group holding a majority of the company's USD 2.2 billion bonds providing an immediate USD 300 million loan, securing priority repayment in case of bankruptcy. The package also includes a USD 400 million first-in, last-out asset-based credit facility and additional commitments of USD 200 million subject to conditions. Despite possessing real estate assets valued at over USD 4 billion net, Saks has struggled to monetise these holdings quickly enough to meet its financial commitments. The company's challenges are compounded by overdue payments, a constrained borrowing base, and seasonal inventory requirements, which have reduced its USD 1.8 billion asset-based lending facility to USD 415 million.

IADS Notes: The current credit rating downgrade reflects a tumultuous year in Saks Global's post-merger evolution. Following the December 2024 merger that created a USD 10 billion luxury powerhouse with a USD 7 billion real estate portfolio, the company faced mounting challenges. February 2025 brought a radical reset of vendor relationships, reducing brand partnerships by 25% and implementing controversial 90-day payment terms. By May 2025, S&P placed the company's 'CCC-plus' rating on credit watch negative, as bonds traded at concerning levels. The situation deteriorated further in June 2025, with bonds reaching record lows of 34 cents on the dollar and USD 1.3 billion in past-due vendor payments requiring attention. Despite securing USD 600 million in new financing, the company's market position has weakened, with recent reports showing a 16% sales decline at Saks while competitors gain market share.

S&P cuts Saks’ credit rating over new financing package