By Dietrich Knauth
NEW YORK, May 1 (Reuters) – Saks Global received court approval on Friday to send its bankruptcy plan to creditors for a vote, asking them to approve a restructuring that would wipe out the company’s equity and hand control over to its senior lenders.
U.S. Bankruptcy Judge Alfredo Perez approved the company’s disclosure statement and allowed Saks to proceed with a vote at a court hearing in Houston, Texas.
Saks’ bankruptcy plan would allow the company to cut most of its prepetition debt and emerge as a smaller company, after Saks used its bankruptcy to repair relationships with luxury brand vendors, close down its off-price retail stores, and close more than half of its Saks Fifth Avenue stores. Votes on its plan are due by June 1.
Under the deal, Saks Global’s senior lenders are set to take control of the company after providing $1 billion in new funding through the bankruptcy and pledging an additional $500 million after the company exits Chapter 11.
Saks Global won the support of its junior creditors by agreeing to set up a litigation trust, with $20 million in initial funding, to pursue lawsuits in hopes of gaining more money for creditors. The junior creditors, who are owed about $1.5 billion collectively, would likely get no recovery without the litigation trust, according to court filings.
Saks filed for bankruptcy on January 13 with $3.4 billion in debt, after its ill-fated merger with Neiman Marcus caused cash shortfalls that prevented Saks from reliably replenishing inventory at its stores and strained its relationship with critical vendors like Chanel, LVMH and Kering.
(Reporting by Dietrich Knauth; Editing by Nia Williams)
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