Hey everyone, Hope you’re getting some time to recharge.

We put out Part I of our piece on Saks Global recently, but frankly I wanted to get this 6,000+ word Part II piece out ASAP given that the Company is currently evaluating a bankruptcy that could be right around the corner. News dropped this week too that their CEO may also resign as well. There was $100mm in interest due yesterday that tbh, we’re not sure if they paid it or not. The story has rapidly declined, so we’re going to talk in great detail regarding the mechanics of this year’s earlier transaction. The full piece is for HYH Premium readers, but I’m going to add a 30% discount offer that will expire in a week. This will be the last discount until November 2026, so it’s now or never on getting full access to our research content.

Btw, Private Equity recruiting sounds like it’s going to kick off in early January. I put out a resources guide here.

Let’s get into it, I hope this is a nice, cozy up by the fire, type of restructuring read.

Part II: Saks Global’s LME and Creditor Dynamics

 By mid-2025, Saks Global was on the brink of a potential default or bankruptcy, beset by dwindling liquidity, vendor freezes, and an untenable capital structure. The company’s response, a creatively structured LME, exemplified the new playbook in distressed debt: creditor-on-creditor violence in the form of priming liens, uptier exchanges, and exploiting indenture loopholes. This second article dissects the Saks LME in detail. We chronicle the phases of the transaction, from initial financing attempts to the final multi-tier exchange offer. We analyze how the 11% 2029 Notes indenture was used (and perhaps contorted) to implement the LME, including the use of “sacred rights” carve-outs, consent solicitations, and asset transfers to an SPV. We also explore the creditor dynamics: the formation of an ad hoc bondholder group that effectively controlled the process, using tactics to exclude others and secure favorable terms for themselves to the detriment of any non-participating creditors. The new financing’s terms, including the $400mm FILO facility and additional notes, are examined, as well as hints of competing proposals that emerged. Finally, we compare Saks Global’s transaction with prior notorious uptiers like Serta Simmons Bedding, specifically the 5th circuit, and Mitel to put into context how this deal fits in the evolving legal landscape.

Timeline of the Saks Global Debt Restructuring

Phase 1 – Early 2025: Warning Signs and Initial Financing Efforts. In the first half of 2025, Saks Global’s financial distress became evident (as detailed in Article 1). Management’s immediate goal was to shore up liquidity ahead of the June 30 bond coupon and the seasonal inventory build for fall 2025. In April 2025, news emerged that Saks was seeking outside financing, specifically a “first-in, last-out” (FILO) term loan layered on its ABL. Such a FILO, often provided by specialty lenders at high rates, would sit junior to the main ABL in collateral but ahead of term debt in priority. SLR Credit Solutions was reportedly in talks to provide around $350mm of FILO funding. Internally, this effort may have been seen as a bridge to get through holiday 2025. However, pursuing this path alarmed bondholders, since a new FILO would effectively prime the existing 2029 Notes (to the extent of the collateral shared, i.e. all working capital and maybe more) and eat into collateral coverage.  

Bond prices reflected this concern, dropping into the 40s cents on the dollar by late April. S&P placed Saks on watch for a selective default, correctly anticipating that any deal involving the bondholders taking less value or being primed would be tantamount to default. At this juncture, two distinct creditor camps started to form: a majority of bondholders inclined to cut a deal with the company (if it meant adding new money and improving their position), and a minority who were on the outside (either by choice or exclusion).

Phase 2 – Ad Hoc Bondholder Group Takes Charge (May 2025): Sensing an opportunity a group of large bondholders organized into an ad hoc group in May. According to reports, this group initially represented just over 50% of the $2.2bn notes, essentially the minimum to control consents and direction. They hired Paul Weiss as legal counsel and Lazard as the financial advisor. Notably, these are heavyweight advisors often associated with creditor committees. The group’s strategy was twofold: (a) negotiate a comprehensive deal with Saks that included new money from the bondholders themselves (preempting the need for a third-party FILO), and (b) crucially, prevent other bondholders from joining the group late and complicating negotiations or demanding equal treatment. On the second point, the majority group took the unusual step of rejecting additional holders from joining after they had reached ~50%. In other words, they “locked” the group’s composition. This exclusionary tactic ensured that they, and only they, would coordinate with the company and dictate terms, a form of control over negotiations that limited information flow to outsiders. (It was reported that non-AHG minority bondholders who were not in the group began seeking their own counsel,  with some engaging Glenn Agre, a law firm known for representing holdout creditors.) Such infighting is why Puck News dubbed it a “creditor-on-creditor cage match” and “creditor warfare”.

Despite not letting others formally join, the ad hoc group’s advisors did keep lines of communication open with the broader bondholder community to some extent. Paul Weiss and Lazard thus signaled to other noteholders that a “non-pro rata” transaction (code for priming uptier deal) was on the table, but not yet a certainty. They also opened a dialogue with Saks’ advisors (Kirkland and PJT) to present the bondholder-led solution. By taking initiative, the ad hoc group aimed to supplant the SLR FILO proposal with their own financing package. This would make the FILO a new-money component that could elevate their claims, similar to a DIP with pre-petition note roll-up to incentivize new money, although this would be out of court. Unlike a traditional DIP this new money component would likely be a FILO, and share collateral with the ABL, and the elevated AHG 2029 notes would likely be exchanged into some form of debt that was above the non-ahg holders, yet subordinate to the ABL.

The upcoming coupon payment was make or break for Saks. If Saks failed to pay the June 30 interest, bondholders (with >25% holding) could accelerate the notes after the grace period, pushing the company into default. The company clearly wanted to avoid a Chapter 11 filing in mid-2025 (management was still hopeful for a turnaround if given breathing room). Thus, Saks was motivated to deal. The ad hoc group could threaten to withhold consent or new money unless terms were favorable.

During May, information asymmetries fueled bondholder anger. Saks had not yet even paid one coupon on the new notes (“Project Black Caviar,” as the December issuance was nicknamed), and already the debt was trading at distressed levels. The lack of transparency (e.g. regarding the full capital structure) also caused surprises; for example, many bondholders were reportedly unaware of the $300mm holdco seller note until the ad hoc group surfaced it. This note, held by Davidson Kempner, Sixth Street and PIMCO (Neiman’s former owners), effectively sat outside the indenture’s restrictions. Its existence meant that even if the operating company debt were restructured, the holdco creditors might later demand their pound of flesh. The ad hoc bondholders knew this note needed to be dealt with “soon,” potentially as part of a holistic solution. (In practical terms, the seller note could potentially be extended or converted in a future scenario; we will see that it was not directly addressed in the exchange and remains an overhang.)

By late May, the outlines of a deal emerged: the bondholder group was willing to inject new money, on the order of a few hundred million, but wanted it to come with priming liens and improved priority for participants. Essentially, a classic “uptier” or priming exchange was devised. Notably, Saks’ indenture permitted open-market purchases by the company, but doing a unilateral uptier like Serta might risk legal challenge. Instead, the parties chose an exchange offer route with consent solicitation, aiming for near-total participation to moot any challenges.

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