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Investing.com -- Moody’s Ratings has downgraded Saks Global Enterprises LLC’s corporate family rating to Caa3 from Caa1 and changed its outlook to negative from stable on Wednesday.
The rating agency also lowered the company’s probability of default rating to Caa3-PD from Caa1-PD and downgraded its senior secured notes to Ca from B3.
According to Moody’s, the downgrade reflects governance concerns, particularly Saks Global’s very weak credit metrics, poor free cash flow generation, and high debt levels. The agency does not expect meaningful improvement in the company’s operating performance or credit metrics over the next 12 months.
"Although the injection of $600 million in new liquidity is a near term positive as it will alleviate the company’s near term liquidity pressures, we do not view this to be a longer term solution unless Saks Global can grow its topline, meaningfully improve earnings and improve free cash flow generation," said Moody’s Vice President Mickey Chadha.
The company has secured $600 million in committed financing from existing noteholders through new notes issued at a wholly owned SPV. The proceeds will fund a $400 million first-in last-out asset-based credit facility and additional commitments of $200 million subject to certain conditions.
Moody’s expects the company’s adjusted debt/EBITDA ratio to exceed 10.0x in 2025, with interest expense coverage being "not meaningful." While Saks Global anticipates achieving synergies with a total run rate exceeding $600 million, Moody’s believes these savings will be partially offset by business investments.
The negative outlook reflects high execution risk and uncertainty regarding improvements in operating performance, credit metrics, and cash flows. The company reported $303 million in availability under its $1.8 billion ABL revolver at the end of the first quarter ended May 3, 2025.
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