Amazon, which owns just over a 23% stake in Saks Global, is now battling the luxury department store company in bankruptcy court.
In filings Wednesday, the e-commerce giant called out its $475 million of preferred equity in Saks Global – its interest in the $2.7 billion merger of Saks Fifth Avenue and Neiman Marcus Group a year ago.
“That equity investment is now presumptively worthless after Saks continuously failed to meet its budgets, burned through hundreds of millions of dollars in less than a year, and ran up additional hundreds of millions of dollars in unpaid invoices owed to its retail partners,” Amazon said.
Over Amazon’s objections, a bankruptcy judge on Thursday granted Saks Global access to hundreds of millions in bankruptcy financing, part of a debtor-in-possession package agreed to by some of Saks’ lenders.
Amazon had asserted that its consent was necessary and complained about other aspects of the days-old Chapter 11 process.
The e-commerce giant said that Saks Global “induced Amazon and other retail partners to extend credit and other accommodations by offering recourse to the purported ‘equity cushion’” in Saks Fifth Avenue’s Manhattan flagship. Now though, Saks is leveraging that asset to secure some $2.6 billion in bankruptcy-related financing, Amazon said.
“Overall, there are significant issues to be addressed in these Chapter 11 Cases with respect to the Debtors’ mismanagement, improper governance, and disregard of corporate separateness,” Amazon said, according to court documents.
This is just the beginning of what is likely to be an unwieldy bankruptcy case with many upset parties, according to Mark Cohen, a former department store executive who once led retail studies at Columbia Business School.
“In an ideal bankruptcy, creditors align with the filing and agree to cooperate. Sometimes they go so far as to actually agree with a pre-packaged outcome,” he said by phone. “Not the case here. There's so many different creditors involved – it's pages and pages — in addition to the vendors who are owed. This thing is going to be an epic battle with disparate interests refusing to coalesce around an outcome.”
The legal skirmishes mar the tie-up between Amazon and Saks Global, which also entailed the establishment of a luxury storefront on Amazon’s site last year.
