Pathlight Capital vs. Saks Global Dispute

Saks Global is in a legal dispute with Pathlight Capital, a lender involved in Saks' $2.7 billion acquisition of Neiman Marcus in 2024. Pathlight claims Saks owes $8.8 million in structuring fees for the deal's financing and restructuring. Saks counters that Pathlight's lack of cooperation contributed to the financial distress and restructuring of its former parent, Hudson’s Bay Company.

Pathlight’s Claim

Pathlight asserts that it fully performed its obligations under the restructuring agreement, which included amending a credit facility and providing a $65.6 million term loan to Hudson’s Bay. Saks paid an initial $5 million fee but allegedly failed to pay two subsequent $4.4 million installments, which were due in March and April 2025 if the term loans were not repaid. Pathlight insists these payments are contractually owed regardless of any disputes about the refinancing process.

Saks’ Defense

Saks argues that Pathlight’s failure to support refinancing efforts for Hudson’s Bay’s term loan blocked HBC from securing much-needed financing. Saks claims this lack of cooperation forced HBC into Canadian restructuring proceedings (CCAA), culminating in a near-total liquidation of HBC’s retail operations. Saks contends that Pathlight should not benefit from actions that allegedly caused the financial crisis and deprived HBC of refinancing opportunities.

Financial and Operational Context

Liquidity and Debt Pressures

• Saks financed the Neiman Marcus acquisition with $2.2 billion in junk bonds, which have since traded down to as low as 38–48 cents on the dollar, reflecting deep investor skepticism about the company’s financial health.

• The company faces a critical $120 million interest payment due June 30, 2025, on this debt. While Saks is reportedly prepared to make this payment, the situation remains tense, and the company is working with financial advisers to shore up liquidity.

• Saks has also recently secured up to $60 million in incremental liquidity from a lender group led by Pathlight and Bank of America, but this infusion is modest relative to its overall obligations.

Vendor Relationships and Payment Terms

• Saks has been late on vendor payments for over 18 months, leading to strained relationships and supply disruptions. In February 2025, Saks announced a new payment structure: new orders would be paid on 90-day terms (up from 30 days at Neiman Marcus), and past-due balances would be paid in 12 monthly installments starting July 2025.

• Vendors, especially smaller brands, have expressed frustration and concern about Saks’ financial viability and the aggressive tone of communications from management.

• Saks claims its payment plan has improved relationships and stabilized inventory levels, but skepticism remains among industry analysts and suppliers.

Broader Strategic and Industry Implications

• The Saks–Neiman Marcus merger was intended to create a dominant U.S. luxury retail platform, backed by high-profile investors like Amazon, Authentic Brands, and Salesforce.

• However, the integration has generated significant costs, and the anticipated synergies have yet to materialize. The company is also under pressure to optimize its vendor base and cut costs, with plans to reduce the number of brands it carries by up to 600 out of 2,660.

• Bondholders and analysts remain wary, noting that the company’s capital structure is “unsustainable” unless business conditions improve markedly.

The Pathlight Lawsuit in Context

While the $8.8 million at stake in the Pathlight lawsuit is relatively small compared to Saks’ overall financial commitments, the dispute highlights deeper issues:

• Trust and Partnership Breakdown: The legal battle underscores a breakdown in trust between Saks and a key financial partner, which could complicate future financing efforts.

• Timing and Sensitivity: The suit comes at a delicate moment, as Saks must reassure creditors, vendors, and investors of its solvency and operational stability.

• Potential Precedent: The outcome may set a precedent for how Saks negotiates with other creditors and partners in the future, especially if the court sides with Pathlight and enforces strict contractual payments despite operational distress.

Saks’ lawyers are expected to formally respond to Pathlight’s complaint by July 22, 2025. In the meantime, the company must juggle critical financial obligations, maintain vendor relationships, and continue integrating Neiman Marcus—all under the scrutiny of skeptical bondholders and industry observers7.

The Pathlight lawsuit highlights and accelerates Saks Global's financial and operational challenges in reshaping the U.S. luxury retail landscape.

Intercreditor Agreements & Priority Structures

• ABL/Pathlight Intercreditor Agreement (Exhibit C in HBC’s CCAA filing) establishes lien priorities between Pathlight’s term loans and asset-based lending (ABL) facilities. This agreement likely granted Pathlight senior secured status over HBC/Saks assets, but its terms allowed Saks to release IP collateral post-Neiman Marcus acquisition.

• Multi-series pari passu structures are implied by Pathlight’s 2024 credit agreement 1, which permits incremental debt facilities while maintaining equal priority for Pathlight’s tranche. This flexibility enabled Saks to layer $2.2B in secured notes alongside Pathlight’s $65.6M term loan.

Sources: octus.com, ionanalytics.com

Cash Sweep Mechanisms & Liquidity Management

• Automated cash sweeps were critical to Saks’ liquidity strategy, as evidenced by its $350–375M liquidity pool and efforts to secure a $300M FILO facility. The Pathlight credit agreement likely included sweep provisions redirecting excess cash to debt repayment, but Saks’ vendor payment delays ($120M past due) suggest sweeps prioritized bondholders over trade creditors.

• Collateral monitoring: Saks’ IPCo subsidiary structure allowed it to move intellectual property (e.g., Saks Fifth Avenue, Bergdorf Goodman trademarks) out of collateral pools via security interest releases, potentially violating sweep-related covenants.

Payment Waterfalls & Debt Hierarchies

A contractual waterfall governed Pathlight’s fees and HBC’s restructuring:

Pathlight’s lawsuit argues its $8.8M fee occupies Tier 2 status, while Saks seeks to demote it below vendor payments via CCAA proceedings.

Covenant Packages & Triggers

• Springing liens: The 2024 Pathlight credit agreement includes subordination clauses (Section 4.03) that may have activated additional liens if Saks’ leverage ratio exceeded 6.0x—a likely scenario post-Neiman acquisition.

• Step-down provisions: Saks’ $2.2B secured notes indenture permitted interest rate reductions if certain EBITDA targets were met, but bond prices at 38–52 cents suggest covenant breaches.

• Cross-default triggers: HBC’s March 2025 CCAA filing triggered cross-defaults under Pathlight’s agreement due to unpaid rent and vendor debts. However, Saks’ Dec 2024 corporate separation limited liability contagion.

Cross-Default Risks Between HBC and Saks

• Pre-spinoff linkages: The original 2020 Pathlight-HBC credit agreement included cross-default clauses tying HBC’s obligations to Saks’. These were partially severed in the 2024 restructuring, but Pathlight’s $65.6M term loan to HBC retained cross-acceleration rights that could implicate Saks if not resolved.

• Post-CCAA isolation: Saks’ IPCo structure and ABL facility amendments insulated it from HBC’s liquidation, though Pathlight’s lawsuit tests this separation by alleging Saks remains liable for HBC’s refinancing failures.

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