Beleaguered retail chain Saks Global is struggling to line up as much as $1 billion in financing to keep its business afloat during a potential Chapter 11 bankruptcy filing, CNBC has learned. 

The luxury chain has been working to secure a “debtor-in-possession” loan, which would allow it to fund operations in the event of a potential bankruptcy filing, people familiar with the matter said. But investors have so far shown little interest in lending Saks the money because they’re skeptical the company can successfully reorganize and pay them back, said the people, who spoke on the condition of anonymity because the discussions are private.

While DIP lenders get repaid before other creditors during bankruptcy proceedings, they don’t always recoup their full investment, and some investors are concerned that could happen if they finance Saks, the people said.

The storied 159-year-old department store, which now owns Neiman Marcus and Bergdorf Goodman, is both a destination and a symbol for luxury fashion, known for offering top brands like Chanel and Dior alongside up and comers like Good American. Across the entire enterprise, Saks Global has more than 70 full-line luxury stores and about 100 off-price locations. 

Since Saks missed an interest payment to bondholders late last month, only a “limited number” of investors have shown interest in financing the DIP loan, while a number of others have declined to get involved, the people said. 

Saks declined to comment on investor interest in its fundraising efforts.

A wide array of firms invest in companies that could be headed for bankruptcy, including top banks and private equity. However, the only firms likely to be interested in investing in Saks at this point are either liquidators that also have investment vehicles or alternative asset managers that have experience in distressed retail, one source said. Still, even some of those investors have declined to get involved with Saks’ DIP loan, the people said.

Liquidation is one of several potential outcomes Saks faces. However, if it can’t line up a DIP loan, which would be used to pay for essential expenses like payroll, rent and inventory, that scenario would be more likely. The retailer is already struggling to pay those costs.

Failure to line up financing would prevent Saks from filing for Chapter 11 bankruptcy, which would give the company a chance to reorganize and potentially find a buyer willing to take on its business as a going concern. It could then be faced with Chapter 7 bankruptcy, which is reserved for liquidation. 

That could mean the end for one of the most fabled department stores in history, whose flagship store on Fifth Avenue, considered by some to be its most valuable asset, has become a global destination. 

In the meantime, Saks has also been in talks with liquidators for a number of stores that are in the process of closing, but not yet the entire chain, the people said.

Saks’ troubles have been mounting since it acquired its longtime rival Neiman Marcus in a $2.7 billion deal in 2024, which was heavily financed with debt.

The tie-up between the two rivals was expected to create a luxury retail powerhouse that could better streamline costs and negotiate with vendors.

Instead, Saks has struggled to pay its vendors on time, leading to inventory gaps and declining sales. A slowdown in the overall luxury market, which has seen growth stagnate in recent years, has compounded the issues.