The rapid collapse of Saks Global

0:04Eric Platt: Hi, excuse me. I'm a reporter for the Financial Times. It's a Wednesday afternoon in Midtown, Manhattan. I'm standing outside the entrance to the luxury department store, Saks Fifth Avenue, and I'm looking to talk to some shoppers. I'm working on a podcast about about Saks Fifth Avenue. Were you just inside the store?

0:27Sujeet Indap: Yes.

0:28Eric Platt: The flagship Saks store on Fifth Avenue is massive. It actually stretches across the whole block. And inside are all kinds of luxury brands. Chanel, Dior, Fendi, you name it. And it's been there for decades.

0:45Sujeet Indap: Inside, everything looks super fancy and wealthy. It's just like a bright spot where everywhere you look at, you will find something attractive to the eyes.

0:57Eric Platt: I talked to several people leaving the store, some longtime shoppers. Actually, I grew up in Tulsa, Oklahoma, and Saks was like the one nice store if you needed a nice pair of jeans.

1:09Sujeet Indap: It was the only thing there where you could go and get like sevens or, you know, nice skincare.

1:16Eric Platt: And some total newbies. This was my first time in Saks, yes. What did you think? I thought it was like something you'd see on a movie, something way out of my league. It was great to see, and I'm glad I went in. But even in the 70 % off, it's like way out of my league. The reason I'm here is because Saks Global, the parent company of Saks Fifth Avenue, recently filed for Chapter 11 bankruptcy protection, which marks the end of an era for this historic retail icon. Have you heard that they filed for bankruptcy late last night? It was last night. No, oh my gosh, my sister told me, like, go use your credit now because I don't know if they're closing or what's going on.

2:00Eric Platt: So I ran over to make sure I used it while I was in the city. The bankruptcy process is expected to wipe out the SAC's shares held by the company's owners. And the debacle has already hit creditors. It's an event that casts some doubt on what the future of SACS will be and raises questions about the state of the luxury sector and debt markets today.

2:29Eric Platt: I'm Michaela Tendera from the Financial Times. Today on Behind the Money, we're looking at what went wrong for SACS Global and what this moment tells us about the risks lurking in public debt markets.

3:01Eric Platt: To talk all things Saks Fifth Avenue, I'm here with two of my colleagues, Eric Platt, the FT's U.S. investment editor, and Sujit Indap, the FT's Wall Street editor. Welcome to the show.

3:13Sujeet Indap: Thanks for having us. Great to be here.

3:15Eric Platt: I think most people, even if you've never set foot inside of the store itself, most people know this name. Why is this store so iconic?

3:27Sujeet Indap: Saks has been a venerated retailer on Fifth Avenue for more than a century, right? It was really one of the first retailers to be bringing kind of European luxury houses into American lives. It's Louis Vuitton, it's Prada, it's Gucci. And they did it at a time when those brands didn't have stores across America. So if you wanted to buy that Burberry scarf, you were probably going to a Saks or a Bloomingdale's. And so it held this really important part of maybe shopping lore for luxury consumers. And I should say it also played like a really important part in pop culture, right? Like, there's a line in this Meg Ryan movie called The Women where Annette Bening turns to a child and says, nobody hates sacks.

4:10Sujeet Indap: I hate this store. April? I want you to listen to me. I'm going to say something very important and I want you to remember it for the rest of your life. Nobody hates sacks. They could base a critical scene in this movie around Sax because it meant so much to women and men of a certain demographic. Wealthy folks across the U.S., people in the upper middle class who aspired to be that.

4:41Eric Platt: So to put it simply, in the U.S., Sax is an iconic brand, synonymous with luxury and sophistication throughout much of the 20th and into the 21st century. But in more recent times, things at Saks, like at a lot of department stores, haven't been going so well.

5:00Sujeet Indap: Saks itself has been struggling over the last three years. And part of that at the very beginning was because there was a slowdown in luxury sales demand, right? Prices had really reached an untenable level. The savings people had built up after the pandemic had been exhausted. And you saw a real pullback in luxury spending. Like you saw this all throughout earnings for the last two years. And that really played a role at Saks as well, where demand softened. And at the same time, they started to run into inventory problems, meaning they didn't have the goods to sell to people when they wanted to buy a size nine shoe.

5:36Sujeet Indap: They might not have that. And so suddenly it was kind of compounding and feeding on itself.

5:40Eric Platt: So literally an issue of stopping into a Saks store and the shelves aren't quite as fully stocked as maybe customers were accustomed to.

5:50Sujeet Indap: Exactly. I used to always, pure anecdote, like American Express gives customers who use their platinum card$50 every six months to spend at Saks. I would use it to buy Aesop soap. I was like, I don't really need anything from Saks, but yeah, the soap is nice. You couldn't find it at Saks for the last year and a half. It was no longer on Saks.com. You couldn't buy it. It briefly popped on and then sold out. And that was the issue for them.

6:14Eric Platt: So to try and turn things around, by 2024, Sachs is looking for a new strategy in the form of another high-end department store.

6:22Sujeet Indap: In 2024, and at this point, Sachs was actually acquired about a decade ago by a Connecticut billionaire named Richard Baker. He had the idea in 2024, why don't I go after this other big brand, Neiman Marcus? You know, a famous brand, again, for high-end customers. It had gone bankrupt in 2020. Anyway, Baker has the idea that why don't we combine Neiman and Sachs?

6:47Eric Platt: In July of 2024, this deal is announced.

6:50Sujeet Indap: Some fireworks in the retail sector.

6:52Eric Platt: The parent company of Sachs Fifth Avenue announcing it will require the company that owns Neiman Marcus and Bergdorf Goodman.

6:58Sujeet Indap: The goal of the deal is to cut costs and boost profitability by giving the new company bargaining power with vendors and reducing supply chain and other shared costs. They got backing from Amazon and Salesforce, and it was going to be all like tech-enabled and AI and cutting-edge and incredible brand names and put all that together. And that would be this kind of killer concept.

7:21Eric Platt: This killer concept comes with a sizable price tag. Sachs agrees to spend$2.7 billion to acquire Neiman. Now, they don't have that cash sitting around, so they have to figure out how to finance this.

7:34Sujeet Indap: When Sachs announced that it's going to buy Neiman, that they've come to a deal, they actually have an agreement with Apollo Global Management, one of the biggest private credit firms in the country, biggest private investment firms writ large. And Apollo is going to put in about$1.2 billion of debt, which they thought would allow the company to operate in a way that was not overly leveraged. They weren't taking out too much debt. And so that leaves Sachs Management with$1.5 billion of a hole that they need to fill somehow. And at that point, Sachs is meant to find other investors who will put equity into the business.

8:09Eric Platt: So in short, to fund this deal, one option Sachs considers is taking a loan from Apollo worth$1.2 billion and then hunting for equity investors to pay for the rest of the$2.7 billion acquisition. But actually, Sachs decides to pursue a second option. And for that, they turn to public credit markets. I'm talking about high-yield bond or junk bond markets, a go-to source of financing for higher-risk companies.

8:37Sujeet Indap: In a public credit deal, the basic feature is this. A company will go to an investment bank. In this case, it was Jeffries. And Jeffries will organize a sale process where they're a middleman. They call up their best 100 or 200 relationships among mutual funds and debt funds. And in this case, they sold that debt community$2.2 billion worth of bonds. It's widely distributed amongst many funds and buyers.

9:04Eric Platt: And in 2024, public credit markets are having a bit of a moment.

9:08Sujeet Indap: Public credit markets and equity markets were rallying aggressively at the end of 2024, right? Donald Trump had just won in November. People were really betting on deregulation, on lower taxes. And so markets were ripping. And so people were investing in deals that were riskier because there hadn't been a ton of leveraged buyout activity. These big mutual funds and credit funds that invest in these deals needed to put their money somewhere. And so they dove into the Saks debt. And they showed so much interest that Saks actually said, never mind, we don't need the Apollo deal. We're going to go with this other deal that's being run by our advisors at Jefferies.

9:48Eric Platt: So what ends up happening is Sachs decides to take the path that loads the company up with more debt. They raise$2.2 billion worth of bonds through Jeffries. And a bit more in equity investment, including from Amazon, fills in to get them to the$2.7 billion purchase price. In December 2024, Sachs closes the deal to acquire Neiman Marcus. But what happens next probably isn't what company executives had hoped for.

10:16Sujeet Indap: It's pretty tough right from the start. They've taken this$2.2 billion debt package and it comes with an 11 % interest rate, which is pretty juicy. And they think they can all make it work, but in fact, it's not so easy. So they've got a lot of interest expense and it became very tight pretty quickly at Saks in that money they owed to various luxury brands would send them shoes or dresses. Those suppliers just weren't getting paid as quickly as they would have liked. And that affects their ability to send more product. And that became a bit of a tough cycle to manage.

10:55Eric Platt: So those inventory issues are not necessarily being addressed in the first six months of 2025.

11:03Sujeet Indap: No, it becomes a huge issue, right? Because at that time, they're telling their vendors, hey, we used to pay you in 30 days. We're paying you in 90 days now. Or we promise we're going to repay you, but we're going to put you on a monthly payment plan. And that might stretch out many months or up to a year. And so if you're one of these big brands, suddenly you're looking at Saks and you're saying, can we keep shipping to them? Like, will they be able to pay us?

11:25Eric Platt: Paying their suppliers isn't the only problem they're facing. The company's first interest payment is coming up.

11:32Sujeet Indap: If we push further into 2025, there's an interest payment that's due in the summer on that bond. And there's a worry amongst investors that they're not even going to be able to find the cash to make that first payment. In advance of that, they end up hiring bankers and lawyers to see if they can raise even more money. And the idea there is they just get another infusion of cash. It'll just create more breathing room both to make this interest payment, but also pay those suppliers who are now getting squeezed. So they end up doing a pretty complicated deal. They raised$600 million of new cash from a bunch of very specialist, if you call them opportunistic funds.

12:13Eric Platt: Sachs eventually secures$600 million to make that first interest payment and pay back suppliers. It still doesn't leave them much breathing room.

12:24Sujeet Indap: Things go wrong almost immediately after that as well. At that point, they're integrating the Sachs and Neiman inventory systems. and there's some kind of issue where Neiman doesn't, their receipts aren't processing properly. So my understanding of that is Neiman suddenly can't borrow as much as it needs to. It can't make payment to suppliers again. And so vendors again are feeling the tightness of this. And because of that, again, terms get tightened once again at the end of the year. One of Sachs' biggest loans, they should have had huge amounts of money available because they didn't have enough cash in their bank accounts.

12:59Sujeet Indap: the lenders dramatically restricted how much they could borrow. And so it just meant Saks didn't have the money to buy things. I think they were saying that ultimately, like, inventory was 9 % below where it was year-ago levels in August. Just showing you, like, how much—they were missing, effectively, a tenth of the store that they needed.

13:18Eric Platt: At the end of 2025, the event that seals Saks' fate arrives.

13:23Sujeet Indap: Then in December, they missed the interest payment. This would have been, I think, around$100 million. and they effectively run out of cash. And at that point, they force out the CEO because it becomes very clear that the creditors are taking the keys to the business.

13:44Sujeet Indap: In business, as in science, innovation begins with a spark of imagination. It grows with ambition and shines brightest in those who challenge the status quo. At Imperial Business School, innovation isn't taught. It's what defines us. That's why we're number two in the QS World Rankings. You'll study business alongside brilliant minds in technology, engineering, and medicine to spark ideas and shape pathways for the leaders of tomorrow. Learn more. Search Imperial Business School.

14:19Eric Platt: And that brings us to this month. Early last week, Saks officially filed for Chapter 11 bankruptcy protection. Now, Eric, Sujit, walk me through this.

14:30Sujeet Indap: So now that the company has decided to file for bankruptcy and has done so, they're going to have to get new capital, new cash to fund their stay in bankruptcy, start paying suppliers. And to do so, they've been able to organize a new$1 billion bankruptcy loan. and that loan is coming from a group of existing bondholders who are putting in that new money and that money will be the most senior debt that Sachs has and it's supposed to fund their stay in bankruptcy and get them to the other side with a new business plan and a lower debt balance. They'll also use bankruptcy to close stores and end leases that are underperforming.

15:13Sujeet Indap: It'll give them a chance to kind of, they call it, you know, quote unquote, rationalize their business, slim it down to where it can be profitable.

15:20Eric Platt: Right. So what happens with all that debt that they raised at the end of 2024?

15:24Sujeet Indap: There's several billion dollars we've talked about today, which has been invested in this company. Nearly all of that is going to zero. That's painful. Yeah. Incredibly painful. So basically the only value in this company going forward is going to be maybe the billion dollars that's going into the bankruptcy loan. So the losses are just shocking. They're massive. They happen very quickly. And again, that new money may not make any recovery either. So it's all very touch and go here. It's so much money that just got lit on fire, right? Like literally zeros, nothing coming back.

15:57Eric Platt: Well, you've both been covering this story from the beginning. What was your reaction when you heard that they were filing for bankruptcy?

16:05Sujeet Indap: Well, there was so much hype for this deal. And it was a surprising deal because, again, you know, these two big names were always independent. and coming together was just a big moment in fashion and retail, but still it was an aggressive transaction. But these were supposedly smart people who knew what they were doing. Amazon was involved. Salesforce was involved. So maybe they knew something we didn't. But then it more or less falling apart immediately and then snowballing into a bankruptcy in basically a year is pretty shocking. There's probably a lot of embarrassment from not just the executives, but there's a lot of famous lawyers and bankers who either provided financing or advice.

16:42Sujeet Indap: And, you know, that all has been not successful. So this is a real black eye for a lot of well-known people. Yeah, and also I was speaking to a lawyer who wasn't involved in the deal. He was just saying how nervous some shoppers are, right? Like we've seen so many department stores die in the U.S., right? Lauren Taylor, Henry Bendel, Barney's, like the list is so long. And the question becomes, can you resuscitate these brands in bankruptcy, went back the support of suppliers? Or have you just watched the demise of a brand that was a part of the American lexicon for more than a century? I think the other takeaway, though, is, yeah, how did credit markets fund this?

17:22Sujeet Indap: How did people look at this transaction in that December and say, yeah, I want to lend money here? And how did they screw it up so quickly?

17:29Eric Platt: Yeah, I want to talk about that more. Sachs raised more than$2 billion from debt markets to buy Neiman in the first place. I mean, as you say, that's pretty much all gone. But Eric, what does Sachs' collapse tell us about the risks in public credit markets?

17:46Sujeet Indap: So the first thing that's critical to think about is the individual holders in this deal, right? These were big money managers, people like Fidelity, BlackRock, Lord Abbott, and Makai Shields. They managed money on behalf of state pension plans and sovereign wealth funds. And it means the returns for those investors, the people who are dependent on money coming from their pension, will be lower. And so they'll have to find a way to manage through this. Hopefully this was a small portion of their overall holdings. It also raises this other question around due diligence that investors were doing more broadly in the high-yield bond market.

18:23Sujeet Indap: So much money had gone in, and so many of these money managers are really scraping by to try to find deals. And so when they see something with an 11 % interest rate on it, they dive in. And so right now, a lot of the market is asking, what other deals did folks do that had similar characteristics or fact patterns that will also struggle to pay off their debt and then hurt the end investor? Yeah.

18:48Eric Platt: Now, I'm curious, Eric, we've had you on the show in the past to discuss the risks in the private credit space, which, as we discussed, Sachs was considering going the private credit route with Apollo. Can you help put into perspective for me, does this show us that one area of lending is riskier than another?

19:07Sujeet Indap: Private credit firms are like licking their chops over sacks going bankrupt this quickly because they're saying this shows all of the risks in public markets, right? That due diligence standards can be lax on both sides. In fact, they use it to say, actually, you know, we would never underwrite this deal with this leverage because we understand like we're not just taking a small piece. So if Apollo is going to lend$1.2 billion, they want to be sure that that investment is going to be rock solid. And I should say that's the argument the private credit firms are making. They themselves invest in hugely risky deals.

19:41Sujeet Indap: A lot of them have avoided retail, though. So I would say that perhaps as a community, we need to stop thinking of like private versus public. It's just credit markets. And a lot of this used to be done by banks and a lot of it still is. But like, yeah, are these investors who are writing big checks and big loans thoughtful enough in their due diligence or restrictive enough when they need to say no? Yeah.

20:04Eric Platt: So do you think that means that we could see other bankruptcies like this this year? Yeah.

20:08Sujeet Indap: No, I think this year is going to be really interesting because there's a lot of companies with a lot of debt. They've found ways to refinance that debt. A bunch of those transactions which avoided bankruptcy like Saks did in June 2025, they're going to end up like Saks in bankruptcy because that transaction didn't work. So Saks is the first of many that are like this. It's among the most high profile and rapidly imploding. And the facts are just sensational. But this will be one of many this year.

20:36Eric Platt: And why is that?

20:38Sujeet Indap: Because companies are still really leveraged. Interest rates are high. The economy is pretty good. But there's just a bunch of businesses that are either slowing down and you combine that with high leverage. They just need to go to bankruptcy court to cut their debt in half or by two thirds. That's what's going to happen to SACS. It's just going to become a much smaller company with a much smaller balance sheet. You can only do that in a really meaningful way in bankruptcy. And companies are just going to run out of options to kick that can. And that is a big event for 2026.

21:13Eric Platt: So to wrap up, what are the lessons to learn from Sachs' troubles? And what will you be watching for in 2026?

21:21Sujeet Indap: As Derek said earlier, there was enormous enthusiasm and exuberance for issuing debt a year ago, two years ago. And so as a consequence, corporate balance sheets are pretty leveraged with relatively high interest rate debt. I mean, 11 % for the Sachs debt from December 2024 was a pretty healthy interest rate to pay, but also was a good return for investors. And they thought they found the right balance. They did not. So this will not be the first company that has debt that's too expensive and then just the absolute amount of debt being too high. And how that gets worked out is going to be a huge question for corporate America.

21:55Sujeet Indap: Yeah, I'm also excited to read what Sujit writes over the coming year, right? This focus on how companies have tried to kick the can down the road and how it hasn't worked. That's the prevailing view now that, right? Sachs did this last year, but so many companies have done work to slash their debt on their balance sheets over the last three years. And it's not working. And so what does that mean for legions of restructuring lawyers and bankers, but also for like the people who work at these companies?

22:25Eric Platt: Eric, Sujit, thanks for coming on the show.

22:28Sujeet Indap: Thank you for having us. Thanks for having us.

22:32Eric Platt: Behind the Money is hosted by me, Michela Tendera. This episode was produced by me and Safiya Etheman. Fact-checking by Simon Greaves. Sound design and mixing by Kelly Gary and Sam Giavinko. Original music is by Hannes Brown Topher Forges is our executive producer Cheryl Brumley is the FT's global head of audio Thanks for listening See you next week

23:26Sujeet Indap: www.fema.org shines brightest in those who challenge the status quo. At Imperial Business School, innovation isn't taught. It's what defines us. That's why we're number two in the QS World Rankings. You'll study business alongside brilliant minds in technology, engineering, and medicine to spark ideas and shape pathways for the leaders of tomorrow. Search Imperial Business School, where science means business.