Fashion
Saks bonds worth just 1 cent hand hedge funds a painful lesson
By
Bloomberg
Published
January 16, 2026
At first glance, Saks looked like exactly the kind of mess hedge funds love. Just months after the company borrowed $2.2 billion to finance its takeover of rival Neiman Marcus, the newly formed luxury retail powerhouse was already running short on cash. Creditors spooked by the pace of the slide rushed for the exits, offering the bonds for less than 40 cents on the dollar.
Bargain hunting hedge funds gleefully took the debt off their hands. This was, after all, a marquee name with valuable brands, prime real estate, big-name backers, and a business that executives said just needed a bit more time to steady itself. Firms including Pentwater Capital Management and Bracebridge Capital jumped in, chasing the promise of eye-popping returns.
Much is still to be determined in the wake of Saks’ bankruptcy this week, including any recovery for its creditors. Yet in the meantime, the episode is shaping up to be a painful lesson in the dangers of trying to catch a falling knife. The bonds that distressed-debt shops snapped up on the cheap are now being bid at less than 1 cent, according to broker runs. The hundreds of millions in extra financing they provided, which sits higher in the repayment pecking order, isn’t faring much better, changing hands around 10 cents.
Through Saks’ Chapter 11 filing, a clearer picture has emerged of a company that quickly veered off plan. Targets were missed, savings failed to materialise, cash drained at a rapid clip, and fixes meant to stop the bleeding never did. Bonds with roughly $486 million of face value held by Pentwater are now quoted at pennies on the dollar, as are about $257 million held by Bracebridge.
“This was a ticking time bomb, and the fuse was lit the day the merger was consummated,” said Mark Cohen, the former director of retail studies at Columbia Business School. “I’ve never seen anything go bad this fast; I don’t know that anyone has.”
A representative for Saks declined to comment beyond the company’s bankruptcy filing. Pentwater and Bracebridge declined to comment. Even after the staggering declines, Saks’ biggest creditors aren’t ready to throw in the towel.
In its bankruptcy filing, the company said it had secured roughly $1.75 billion in post-petition financing, including $1.5 billion from a group of senior secured bondholders betting a second act could yet salvage the retailer- and their own fortunes, possibly by converting battered debt positions into significant equity stakes.
Some will also collect fees for helping arrange the financing. What’s more, the structure of the post-bankruptcy financing Saks has lined up could allow certain debtholders to realise better returns on the company’s outstanding bonds than where they’re currently trading, some investors suggested.
Pentwater and Bracebridge are among those putting up more money, according to people with knowledge of the matter.
Whether it’s enough to turn around a company that burned through more cash than it generated last year remains to be seen. Perennially late payments have “damaged trust” with Saks’ suppliers, the retailer said in bankruptcy documents, and while new management is working to repair those relationships, some vendors may decide to take their business elsewhere.
The company is also facing stiff objections from unsecured creditors, including Amazon.com Inc., that are seeking to block access to the new financing package. The tech giant, which previously acquired a $475 million preferred equity stake in the luxury retailer, recently called its investment in Saks “presumptively worthless.” Other equity holders including Rhone Capital and Insight Partners also suffered significant losses, separate people familiar with the situation said.
Representatives for Amazon and Insight Partners didn’t respond to requests for comment. Rhone Capital declined to comment.
Some investors who opted not to participate in the latest debtor-in-possession financing were concerned that the rescue could echo other recent misfires. They pointed to First Brands Group, the bankrupt auto-parts supplier whose lenders put up more than $1 billion post bankruptcy, only to watch their super-senior bonds crater in value as the company burned through the cash and signalled it would need even more money.
With rescue financing, “you get a lot of structuring fees, an above-market interest rate, liens on the best collateral, an equity cushion below you, with the added upside that you’re in control as the restructuring process plays out,” said Rishi Goel, the global head of distressed debt at Aegon Asset Management.
“But it’s got to be structured correctly. The equity value below you has to be real,” Goel said. “If you’re misled, or the business is worth less than you thought or becomes worse than you thought, the value can dry up quickly.”
For now, Saks has said that stores under all its brands are open. A number of creditors say they are confident that new management, led by former Neiman Marcus Chief Executive Officer Geoffroy van Raemdonck, can steer the company through bankruptcy and, once it emerges, make its portfolio of luxury department stores profitable.
Not everyone is convinced. “The rationale for putting these two businesses together made no sense form the get go, and it’s hard to believe that these deep-pocketed masters of the universe fell for it,” Cohen said.
According to the Drewry WCI index, the spot rates from Shanghai to New York and Los Angeles decreased by 3 per cent to $3,552 and $2,810, respectively, per 40-foot container. As per Drewry’s Container Capacity Insight, 9 blank sailings have been announced on the Transpacific trade route for next week to maintain capacity. A few carriers have announced a Peak Season Surcharge (PSS) of around $2,000 per 40ft container, effective May 1. Drewry expects freight rates to remain relatively stable in the coming weeks before the implementation of the announced PSS.
Drewry WCI snapped a six-week rally, falling 2.72 per cent to $2,246 per FEU amid easing freight rates.
Declines on Asia–Europe and Transpacific routes drove the drop, though carriers plan PSS hikes from May.
Despite Middle East tensions, rates are expected to remain relatively stable, with capacity shifts and blank sailings influencing movements.
Spot rates on the Shanghai–Rotterdam trade route decreased 3 per cent to $2,229 per 40ft container, while rates on Shanghai–Genoa fell 2 per cent to $3,343 per 40ft container. Carriers are increasing effective capacity on this trade route, with only one blank sailing announced so far. Meanwhile, ZIM has announced a new bunker factor (NBF) of $850 per container, effective May 1, but for now Drewry expects freight rates to remain stable in the coming week.
Rates from New York to Rotterdam decreased 4 per cent to $1,022 per FEU, while Rotterdam to New York increased 3 per cent to $2,030 per FEU. Rotterdam-Shanghai rose 1 per cent to $599 per FEU, and Los Angeles–Shanghai steadied at $762 per 40-foot container.
The US-led naval blockade around the Strait of Hormuz has halted or restricted ships linked to Iran, with multiple vessels turned back. The disruption has strongly impacted global oil supply chains and pushed oil prices even higher. If ongoing negotiations fail, shippers should prepare for reduced schedule reliability, potential port omissions, longer lead times and upwards pressure on freight rates.
Fibre2Fashion News Desk (KUL)
The country has ensured import of refined fuel from alternative sources despite the global situation, and there will be no adverse impact on oil supply due to ERL’s low feed operations, Energy Division joint secretary Monir Hossain Chowdhury was cited as saying by domestic media outlets.
Bangladesh’s Energy Division recently said the capacity of Eastern Refinery Limited (ERL) would affect little the fuel supply system as the unit contributes only a fifth of the country’s petroleum supply system while the rest is imported in refined form.
It has ensured import of refined fuel from alternative sources, and there will be no adverse impact on oil supply due to ERL’s low feed operations.
The facility is now operating two of its four units to refine oils with ‘dead stocks’ and is expected to make two other units operational again, he said. The process to import crude is under way.
Chowdhury said production slowdowns at two ERL units due to crude oil shortages would not disrupt the nation’s fuel supply as over 255,000 metric tonnes of refined fuel is in stock now.
The Strait of Hormuz has been almost closed since February 28 preventing scheduled arrival of 2,00,000 metric tonnes of crude oil to Bangladesh during that period, he noted.
A ship carrying 100,000 tonnes of crude was supposed to arrive from Saudi Arabia in March, but is currently stuck at Rastanura Port as it could not cross the Hormuz Strait, he informed reporters at a press conference. Another ship from the United Arab Emirates (UAE) also met the same fate.
A third ship carrying 100,000 tonnes of Arabian light crude is scheduled to depart from the UAE on April 20 and expected to reach Chattogram via an alternative route on May 2 or 3, he said.
The government has also requested Saudi Arabia to provide another 100,000 tonnes of crude oil in May, he added.
A work order has been issued with the approval of the cabinet to import 100,000 tonnes of crude oil through direct purchase to meet urgent needs.
Fibre2Fashion News Desk (DS)
Drewry WCI snaps 6-week rally due to ease in freight charge
Some grocers are using AI to cut food waste and boost profit margins
Bangladesh ensuring import of refined fuel from alternative sources
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