Amazon has declared its investment in Saks Global “presumptively worthless,” escalating tensions in what is shaping up to be a contentious Chapter 11 bankruptcy for the luxury department store operator.
In court filings Wednesday, the e-commerce giant, which owns just over a 23% stake in Saks Global, said its $475 million preferred equity investment tied to the $2.7 billion merger of Saks Fifth Avenue and Neiman Marcus Group has been effectively wiped out.
“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.
Amazon’s objections were lodged as Saks Global sought approval for debtor-in-possession financing.
Despite Amazon’s opposition, a bankruptcy judge on Thursday granted the retailer access to hundreds of millions of dollars in new financing backed by a group of its lenders.
Amazon argued that its consent was required for the financing and raised broader concerns about Saks Global’s conduct since the merger closed roughly a year ago.
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The company said Saks Global persuaded Amazon and other retail partners to extend credit by offering recourse to an “equity cushion” tied to the Saks Fifth Avenue Manhattan flagship.
Amazon now claims Saks is repurposing that same asset to secure roughly $2.6 billion in bankruptcy-related financing.
“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 in the filing.
The dispute suggests a long and complicated restructuring ahead, according to Mark Cohen, a former department store executive and ex-director of retail studies at Columbia Business School.
“In an ideal bankruptcy, creditors align with the filing and agree to cooperate,” Cohen said by phone. “Not the case here. There are so many different creditors involved, pages and pages, in addition to vendors who are owed. This thing is going to be an epic battle with disparate interests refusing to coalesce around an outcome.”
The legal fight further complicates Amazon’s strategic partnership with Saks Global, which included the launch of a luxury storefront on Amazon’s platform last year.
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