Saks Global and Simon Property Group — its largest landlord — have resolved disputes over leases and other issues that have simmered since at least the start of the year and threatened to hold up progress in Saks Global’s Chapter 11.
The embattled luxury conglomerate, which includes Saks Fifth Avenue, Neiman Marcus and Bergdorf Goodman, aims to wrap up its bankruptcy next month with $1.2 billion in debt and $700 million in liquidity.
The terms of the agreement, which awaits approval by the U.S. Bankruptcy Court for the Southern District of Texas, include rent breaks and more advantageous lease terms for several Saks Global locations at Simon properties, both off-price and full-line. Notably, Saks Global would continue to run two stores that Simon was trying to evict because they were behind in rent: a Saks Off 5th location at Woodbury Common Premium Outlets in New York and a Neiman Marcus location at the Stanford Shopping Center in California.
In January Simon asked the court to recognize its termination of those leases for more than $7 million in unpaid rent, arguing that it had moved to strike them about a week before Saks’ bankruptcy filing. Simon has previously said that its $100 million investment in Saks Global — an assist to the $2.7 billion deal that merged Saks Fifth Avenue and Neiman Marcus Group — allowed it to exit those leases and wriggle out of other stringent covenants covering dozens of Saks Global stores at Simon malls.
The two companies have been negotiating for weeks, and the compromise avoids what would likely have been drawn out litigation on both sides, according to a statement from Saks Global Chief Restructuring Officer Mark Weinstein. The agreement includes the Saks Off Fifth digital debtors, which are liquidating and have their own restructuring officer.
If approved, it would permit Saks “to continue to occupy many of their most lucrative stores, preserve a constructive go-forward relationship with [its] largest landlord, provide materially improved lease terms for certain assumed properties, and provide for payment” for some leases that have been terminated, Weinstein said.
Saks Global has agreed to shorter lease terms at some locations “and to certain protections for Simon in the event of a future chapter 11 case.” There’s also some leeway to end the Stanford lease, though Simon would have to “appropriately compensate” Saks Global for that, per court documents filed on Friday. And Saks Global will make certain payments, including accrued charges and Simon’s attorney fees.
Otherwise, much of the agreement has been redacted. Simon Property Group didn’t immediately return a request for comment.
