Capital Markets

Saks to Buy Back Debt

The embattled retailer hopes to avoid a potential acceleration of payments on all its senior notes.
Stephen TaubJune 22, 2005

Saks Inc. will pay $658 million to buy back three debt issues and is prepared buy nearly $1.22 billion of its total debt.

The embattled retailer, which is embroiled in an accounting scandal, agreed to pay $990 for each $1,000 principal amount for issues maturing in 2010, 2013, and 2019. They had been recently trading below par, according to The Wall Street Journal.

Saks is also offering a modest consent payment — $1 per $1,000 principal amount of notes — to holders of nearly $562 million in notes due in 2008, 2011, and 2024 who waive their rights to early repayment, the paper noted.

Last week the company received a notice of default from a hedge fund — identified in press reports as Highbridge Capital — regarding Saks’s $230 million 2 percent convertible senior notes due March 15, 2024. The notice asserted that Saks breached a covenant in the notes that requires the company to file its annual report within 120 days of its January 29, 2005, fiscal year-end.

The Journal also noted that the company is seeking an extension, until October 31, to file its annual report with the Securities and Exchange Commission. As things stand now, Saks — which also hasn’t submitted its quarterly report for the period ended April 30 — must file both reports by August 13 or negotiate a settlement with creditors to avoid a potential acceleration of payments on all its senior notes.