Business
How Saks’ acquisition of Neiman Marcus plunged the company into bankruptcy: ‘Recipe for disaster’
For more than a decade, the former executive chairman of Saks Global dreamed of adding Neiman Marcus to his collection of legacy department stores, believing the combined entities would create a luxury powerhouse strong enough to defy changes dragging down the industry.
Instead, Richard Baker’s $2.7 billion acquisition of Neiman Marcus in 2024 ultimately plunged the company into bankruptcy just over a year after the transaction closed. From the very start, the company was struggling to pay its bills — which led to angry vendors and little room for error.
In a Wednesday declaration filed in Houston’s bankruptcy court hours after Saks filed for Chapter 11 bankruptcy protection, chief restructuring officer Mark Weinsten wrote that the deal led to “immediate liquidity challenges” and created an “unsustainable” capital structure.
Mickey Chadha, Moody’s Ratings vice president of corporate finance, called it a “recipe for disaster.”
“You had the two companies that weren’t doing great, and then you combine the two companies and put on a large amount of debt,” said Chadha. “It was an unsustainable capital structure right from the beginning.”
The deal, funded with $2.2 billion in junk bonds, brought an influx of liquidity. But once the transaction closed and both companies paid debts related to the agreement, there wasn’t enough money left over to pay Saks’ vendors.
With bills running late, vendors were less willing to send Saks inventory. Soon, the retailer lacked an adequate assortment to drive sales, leading the situation to deteriorate.
“This created inventory gaps which then drove customers away and caused revenue and cash generation to plummet. This classic vicious spiral put the business in an unsustainable position,” retail analyst Neil Saunders, the managing director of GlobalData, wrote in an emailed note.
“While the previous management team always presented the merger as an opportunity to create a luxury powerhouse, behind the glossy facade the deal was an entanglement of complex financial engineering that made it impossible for the group to execute their stated vision.”
With Neiman Marcus, Bergdorf Goodman and Saks Fifth Avenue under the new Saks Global umbrella, the company expected to see $600 million in run-rate synergies over the five years after the deal closed, Weinsten said. But soon after the transaction closed, Saks realized integrating Neiman Marcus was going to be more difficult, and costly, than expected.
Just ahead of last year’s critical holiday shopping season, Saks was “affected by one-time merchandising system integration issues,” which disrupted inventory flows at Neiman Marcus and Bergdorf Goodman at a time when sales and inventory were already at a “seasonal low point,” Weinsten wrote.
Saks’s borrowing was asset based, meaning loans were backed by its inventory. Once the company had less merchandise on hand, Saks could not borrow as much as it needed to. With less liquidity, it couldn’t pay vendors according to the terms they agreed upon.
Soon, $244 million in “catch-up payments” Saks had scrounged up to pay its vendors was “negated,” and once again the company was struggling to stock its shelves with the assortment its wealthy customers had come to expect, Weinsten said.
By the end of the second fiscal quarter on Aug. 2, inventory was 9% below the previous year’s levels, and it had over $550 million less in inventory receipts than it previously expected. That further reduced its liquidity under the terms of its asset-based loan.
It spelled trouble for the key holiday season because Saks couldn’t do what a retailer always needs to do to remain competitive: “chase” inventory so it had in-demand and on-trend items available during the busiest time of the year.
“You can’t really sustain that much debt just on synergies,” said Chadha. “You have to grow the top line, increase your sales and increase profitability in order to sustain that much amount of debt.”
Four months after Saks secured new financing, it missed an interest payment to bondholders at the end of December. Two weeks later, it was bankrupt.
‘Not a declining brick-and-mortar business’
In Weinsten’s declaration to the court, he made it clear it was Saks’ liquidity challenges, and its subsequent issues with vendors, that plunged it into bankruptcy — not larger issues related to the luxury goods market or the decline of department stores.
“[Saks] is not a declining brick-and-mortar business,” Weinsten wrote. “There are strong indications that the Debtors’ most lucrative customers are continuing to spend through their retail channels … in that respect, the constraints faced by the Company are not driven by declining demand; where product is available, performance has remained robust.”
He said the company does not need to make significant investments in marketing or capital expenditures to improve sales trends. Also, the synergies it expected to achieve through its merger with Neiman Marcus are starting to materialize more quickly.
By the end of its current fiscal year 2025, Saks had predicted run-rate synergies of approximately $150 million, but it’s now expecting that number to grow to $300 million. It’s seeing strong retention rates with its top customers and positive sales when inventory is in stock.
“This indicates that the Company’s challenges are tied to inventory availability and vendor confidence,” Weinsten said. “Not underlying demand for luxury goods.”
Through its restructuring plan, which is subject to court approval, Saks has secured $1.75 billion in new financing and has pledged to make “go-forward” payments to vendors, honor all customer programs and continue staff payroll and benefits. A portion of the funds, $500 million, will be available to the company after it emerges from bankruptcy, which it said it expects to do later this year.
Whether it’ll be able to win back its vendors and get the business back to growth will fall on the company’s new CEO, former Neiman Marcus CEO Geoffroy van Raemdonck.
While the company’s executives assert conditions are strong for a rebound as long as the company replenishes its balance sheet, department stores aren’t what they used to be. Luxury brands have their own websites and stores and are no longer as reliant on wholesalers like Saks and Neiman Marcus as they once were.
“They’re going to have to do something drastic, right? They can’t survive with this financing, just as is … because just filing is not going to change what Saks really does. It’s not going to get people into the door to buy more stuff,” said Chadha. “You’re going to have to change the overall operation, so it’s going to take a while. It’s an uphill battle. They’re not in the best space. It’s a department store, as it is.”
Inflation has risen to 3.4% in the year to December, driven by higher tobacco prices and airfares, according to official figures.
The increase in average prices across the UK economy – the first in five months – was just above expectations, with many economists predicting only a slight uptick to 3.3%.
The cost of airfares was a contributor “likely because of the timing of return flights over the Christmas and New Year period”, the Office for National Statistics (ONS) said. It also reflected an increase in tobacco duty introduced in late November.
It is the last set of monthly inflation figures released before the Bank of England’s decision on interest rates in February.
In addition to tobacco and transport prices, “rising food costs, particularly for bread and cereals, were also an upward driver,” said ONS chief economist Grant Fitzner.
“These were partially offset by a fall in rents inflation and lower prices for a range of recreational and cultural purchases.”
In response to the figures, Chancellor Rachel Reeves said her priority was cutting the cost of living, citing measures in her November Budget including a freeze to rail fares and prescription charges.
“Money off bills and into the pockets of working people is my choice.
“There’s more to do, but this is the year that Britain turns a corner,” Reeves said.
Inflation in the UK is a measure of the Consumer Prices Index, which is a virtual basket of hundreds of everyday goods and services selected by the ONS that includes things like bread, fruit, furniture and different items of clothing.
The prices of these items are tracked by the ONS over the previous 12 months, and the basket is regularly updated to reflect shopping trends.
MUMBAI: AU Small Finance Bank, which has received RBI nod to convert into a commercial bank, reported a net profit of Rs 667.66 crore for the December 2025 quarter, up 26.3% from Rs 528.45 crore in the corresponding quarter last year. The improvement was driven by strong growth in core earnings and a sharp reduction in credit costs, which offset higher operating expenses.Net interest income (NII) rose 15.8% year-on-year to Rs 2,341.27 crore, compared with Rs 2,022.71 crore in the December 2024 quarter. Interest earned increased to Rs 4,727.47 crore from Rs 4,113.48 crore, while interest expended rose to Rs 2,386.20 crore from Rs 2,090.77 crore. On a sequential basis, NII increased 9.2% from Rs 2,144.42 crore in the September 2025 quarter, reflecting improved yields on advances and relatively stable funding costs.During the quarter, the bank also announced a series of board and senior management changes as part of a broader leadership realignment. The board approved the appointment of Phani Shankar as non-executive independent director for a three-year term. It also cleared the appointment of Vivek Tripathi, chief credit officer, as whole-time director, subject to regulatory and shareholder approvals. Uttam Tibrewal, who will complete his current term as whole-time director in April 2026, will continue as deputy CEO, while Divya Sehgal, non-executive non-independent director, resigned after completion of the integration of Fincare Small Finance Bank. V G Kannan is set to complete his second term as independent director in January 2026.Other income increased 17.0% year-on-year to Rs 723.80 crore from Rs 618.41 crore a year earlier, supporting overall revenue growth. Total income for the quarter rose to Rs 5,451.26 crore, compared with Rs 4,731.89 crore in the corresponding period last year.Operating expenses climbed 28.8% year-on-year to Rs 1,849.75 crore from Rs 1,436.21 crore, driven by higher employee costs and expansion-related spending, including regulatory-linked adjustments. Despite this, operating profit before provisions remained broadly stable at Rs 1,215.31 crore, compared with Rs 1,204.91 crore in the year-ago quarter.Provisions (other than tax) declined 34.0% year-on-year to Rs 331.14 crore from Rs 501.68 crore, reflecting lower credit costs. Tax expense increased to Rs 216.51 crore from Rs 174.78 crore, in line with higher profitability.Asset quality remained stable, with gross NPAs at Rs 2,880.54 crore, compared with Rs 2,335.51 crore a year earlier, while the gross NPA ratio was largely unchanged at 2.30% against 2.31% in the corresponding quarter last year. The bank’s capital position strengthened, with the capital adequacy ratio improving to 19.01% from 18.01%, providing headroom for future growth.
Business
‘Our refineries are robust!’: India can process Venezuelean crude oil when available; here’s what IOCL chairman said – The Times of India
Indian Oil Corporation Ltd (IOCL) said that the country’s refineries are capable of processing Venezuelan crude if supplies resume. “If at all things start settling down, if at all a lot of crude starts coming out of Venezuela, then can’t we import oil from Venezuela?” he said.The executive further added that the company, used to process Venezuelean crude a decade back and can do so again. “Venezuelan crude earlier when it was available, like 10 years back or eight years back when it used to be there in the market,” Sahney said at the World Economic Forum (WEF) in Davos.
Speaking about the capabilities of the refineries, the chairman highlighted that they are strong and can process the supplies. “So our refineries are varied, our refineries are robust. They can process in an admixed manner, but we can process Venezuelan crude if and when it is made available.”The remarks follow the US’s capture of outsted Venezuelan President Nicolas Maduro in a military operation and an agreement to send 50 million barrels of oil, worth $5.2 billion, to the interim Venezuelan government.Sahney also highlighted India’s favourable economic and energy landscape. “India is growing at a phenomenal rate, and everybody is interested in talking about doing business with India,” he said.Commenting on global crude prices, he noted, “Crude has been trading in the range of $60-65 per barrel over the past several months. For the better part of the last six months, they were at $60 or below. This is a good zone where economic growth is also happening and sellers of crude are comfortable.”Pointing out India’s reliance on imports, he said, “India remains heavily dependent on imports to meet its energy needs, with IOCL importing about 85-87% of its crude oil requirements. The current price band is supportive for economic stability.”Sahney explained that refining margins depend on more than crude prices. “Refining margin is a very broad term. It is finally affected by the cracks in the international market. Today, cracks are working fine. They have returned to normalcy but are still in a healthy zone,” he said.He added that government policy has also supported the sector. “There is no problem on the policy side. Whatever support is required has already been given. It is up to us to improve profitability by increasing efficiency, reducing costs and optimising the supply chain,” Sahney said.Moving forward, Indian Oil plans to continue investing across the energy value chain, including downstream petrochemicals and cleaner energy solutions.The WEF’s 56th Annual Meeting runs from January 19 to 23, 2026, in Davos-Klosters, with around 3,000 participants from over 130 countries, including world leaders, CEOs, innovators and policymakers, under the theme “A Spirit of Dialogue.”
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