Standard & Poor’s, in a move that was largely expected, on Friday downgraded Saks Global.

The ratings agency downgraded Saks Global to “selective default” from “CC” and its issue-level rating on notes issued in December 2024 to ‘D’ (default) from ‘CC.’ S&P has been concerned about Saks’ liquidity, revenue declines, overdue payments to vendors, and inventory shortages.

While being downgraded is not a good look for Saks, S&P’s anticipated move is viewed as more of a technicality that shouldn’t have any tangible impact on the retailer’s operations or future financing ability.

The downgrade comes in the aftermath of Saks Global completing its debt restructuring on Aug. 20, which included the exchange of notes issued in December 2024 used to finance Saks’ $2.7 billion acquisition of the Neiman Marcus Group.

Referring to the debt restructuring, S&P stated, “We view the transaction as tantamount to a default because it included a debt exchange at a discount and the re-tiering of its outstanding senior secured notes issued in December 2024,” which means certain creditors were deprioritized. “Therefore, we lowered our issuer credit rating on Saks Global to ‘SD’ (selective default) from ‘CC’ and our issue-level rating on its notes issued in December 2024 to ‘D’ (default) from ‘CC’,” which is already a very low rating suggesting a company’s vulnerability.

“As part of the exchange transaction, the company has received new money totaling approximately $600 million from participating lenders, improving its liquidity position,” S&P stated. “We view the transaction as tantamount to default because of the company’s weakening liquidity position leading up to the transaction and free operating cash flow deficit. Furthermore, initial senior secured note lenders are getting less than originally promised due to the below par debt exchange, which resulted in an overall discount of about $115 million compared with pre-transaction amounts and the re-tiering of its position in the capital structure…We expect incremental annual interest expenses will represent an additional hurdle to the company’s ability to generate free operating cash flow.”

Still, S&P also indicated that it will evaluate the company’s revised capital structure and its recent strategic initiatives “when we have sufficient information on the go-forward capital structure and expect to raise the issuer credit rating to the ‘CCC’ category at that time.” That should happen very soon.

S&P expects that Saks Global will use the $600 million to rebuild its inventory position, which has been depleted due to certain vendors either discontinuing or reducing shipments. S&P also expects the money will be used to pay the retailer’s vendors and invest in synergies from the Neiman’s acquisition.

Responding to the downgrade, a Saks Global spokesperson said, “This update was anticipated following the close of our recent transaction, in which we secured $600 million in financing from existing bondholders. It is important to note that these rating actions apply to the notes issued in December 2024, and not to the new notes issued in August 2025, which are currently unrated.

“S&P expects to upgrade its rating as it learns more about our new capital structure and go-forward strategic initiatives,” the spokesperson added. “There is no default under Saks Global’s existing agreements, and the rating has no impact on our operations. We remain confident in our ability to deliver for our stakeholders.” 

In addition to the debt restructuring, Saks Global’s liquidity position should improve because the company is working hard to capture synergies through the addition of NMG into its portfolio, involving consolidating various functions and layoffs to reduce costs. Saks Global expects to reduce annual costs by $600 million within the next few years.