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What Designers Should Know About Saks Global’s Bankruptcy
From how to get an invoice paid to getting merchandise returned, JVC’s Sara Yood answers some complex questions.
Saks Global, parent company of Saks Fifth Avenue, Neiman Marcus, Bergdorf Goodman and other retailers, filed Chapter 11 last month, leaving vendors with unanswered questions.
New York—Saks Global filed for Chapter 11 bankruptcy protection last month as the retailer continues to struggle under the weight of its debt and declining sales in its department stores.
In the months leading up to the bankruptcy filing, the company’s vendors reported having trouble getting their invoices paid.
The retailer’s liabilities are estimated to be between $1 billion to $10 billion, and it owes money to more than 10,000 creditors, as per court documents.
Its top unsecured creditors include Chanel ($136 million) and Kering ($59.9 million), with jewelry brands like David Yurman and Roberto Coin also owed millions.
The ongoing bankruptcy has left vendors with outstanding invoices and a lot of questions.
Last week, National Jeweler connected with Sara Yood, CEO and general counsel at the Jewelers Vigilance Committee, to help shed some light on the situation.
What is Chapter 11 bankruptcy?
When a company files for Chapter 11 bankruptcy protection, it’s looking to reorganize. It is not the same as a Chapter 7 bankruptcy, in which a company liquidates and ceases to exist.
“It allows the company in bankruptcy to shed certain debts, get rid of certain contracts or commitments, get new financing, and emerge on the other side with a new capital structure,” explained Yood.
As part of the proceedings, Saks Global secured financing of $1.75 billion, including $1.5 billion from an ad hoc group of its senior secured bondholders and $240 million of incremental liquidity from its asset-based lenders.
The funds will be used to strengthen its balance sheets and continue operations, it said.
Does this mean Saks doesn’t have to pay the money it owes its vendors?
Not exactly; a Chapter 11 filing doesn’t absolve Saks from ever paying a jewelry designer or any other vendor.
However, Yood said, jewelry designers may receive less than full value, or no value, on their claims as a result of the proceedings.
Can I still receive money owed to me by Saks?
It is possible to get that money back, but it does depend on the type of claim the designer has.
In general, a creditor has to file proof of a claim, Yood said. When Saks exits bankruptcy, there will be a court-approved reorganization plan.
This plan will outline the repayment of various claims, including the amounts that will be paid.
“It will also depend on what arrangements are negotiated with the debtors by each creditor, including for products supplied during the bankruptcy,” she said.
“Designers should seek counsel from an attorney familiar with bankruptcy practice to understand what rights they have and how best to enforce them.”
Related stories will be right here …
In the months leading up to the bankruptcy filing, the company’s vendors reported having trouble getting their invoices paid.
The retailer’s liabilities are estimated to be between $1 billion to $10 billion, and it owes money to more than 10,000 creditors, as per court documents.
Its top unsecured creditors include Chanel ($136 million) and Kering ($59.9 million), with jewelry brands like David Yurman and Roberto Coin also owed millions.
The ongoing bankruptcy has left vendors with outstanding invoices and a lot of questions.
Last week, National Jeweler connected with Sara Yood, CEO and general counsel at the Jewelers Vigilance Committee, to help shed some light on the situation.
What is Chapter 11 bankruptcy?
When a company files for Chapter 11 bankruptcy protection, it’s looking to reorganize. It is not the same as a Chapter 7 bankruptcy, in which a company liquidates and ceases to exist.
“It allows the company in bankruptcy to shed certain debts, get rid of certain contracts or commitments, get new financing, and emerge on the other side with a new capital structure,” explained Yood.
As part of the proceedings, Saks Global secured financing of $1.75 billion, including $1.5 billion from an ad hoc group of its senior secured bondholders and $240 million of incremental liquidity from its asset-based lenders.
The funds will be used to strengthen its balance sheets and continue operations, it said.
Does this mean Saks doesn’t have to pay the money it owes its vendors?
Not exactly; a Chapter 11 filing doesn’t absolve Saks from ever paying a jewelry designer or any other vendor.
However, Yood said, jewelry designers may receive less than full value, or no value, on their claims as a result of the proceedings.
Can I still receive money owed to me by Saks?
It is possible to get that money back, but it does depend on the type of claim the designer has.
In general, a creditor has to file proof of a claim, Yood said. When Saks exits bankruptcy, there will be a court-approved reorganization plan.
This plan will outline the repayment of various claims, including the amounts that will be paid.
“It will also depend on what arrangements are negotiated with the debtors by each creditor, including for products supplied during the bankruptcy,” she said.
“Designers should seek counsel from an attorney familiar with bankruptcy practice to understand what rights they have and how best to enforce them.”
What is the difference between a secured and an unsecured creditor? Who gets paid first?
A secured creditor is an entity “that [has] made the loan correctly and legally taken all the steps to perfect a security interest in the goods provided and notified any other creditors of their interest,” said Yood.
An unsecured creditor is an entity that is owed money but does not have a security interest in a specific asset.
In general, secured creditors are paid before unsecured creditors in a Chapter 11, said Yood, but the process can be more complex.
Will I get my merchandise back from Saks?
Possibly. It depends on the wording and nature of the agreements with debtors, Yood said.
For a designer to get their merchandise back, it may require an agreement between the various parties and lenders or a court order.
Can I get my money or merchandise back now? Do I have to wait for the bankruptcy proceedings to play out?
Possibly. The best thing to do is to contact a bankruptcy attorney to understand the options available, Yood said.
“The bankruptcy court has approved certain procedures related to funding the debtors’ ongoing operations during the bankruptcy, including some that would allow for repayment of certain claims or portions of claims on terms negotiated with the debtors and stakeholders and approved by the court,” she said.
What are the best ways for a designer to protect themselves when doing business with a retailer?
Yood advised jewelry designers to file a Uniform Commercial Code (UCC) and keep them updated, as they only last for a few years.
The form outlines the designer’s security interest in the products at issue.
“Make sure that any consignment agreements are crystal clear as to the designer maintaining title and ownership to the pieces placed on consignment,” Yood said.
“The jewelry business is inherently risky, but we know [it] relies on memo business, so you have to do things to mitigate that risk.”
JVC’s guide to memo transactions is available here.
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