A significant legal conflict is brewing between Amazon and Saks Global, with Amazon determined to explore “all legal remedies” to reclaim the $475 million it alleges it’s owed following Saks Global’s recent bankruptcy filing.
During a hearing on Wednesday in a U.S. Bankruptcy Court in Houston, Amazon expressed disappointment over the decline of its partnership with the luxury retailer. The company opposed Saks Global’s proposal for a $1.75 billion debtor-in-possession (DIP) loan intended to sustain operations during its Chapter 11 process.
Amazon accused Saks of prioritizing other creditors over its own claims, likening the situation to “borrowing from Peter to pay Paul,” and insisted that Saks’ bankruptcy exit plan should be halted.
Amazon suggested that an “immediate liquidation” of the Saks flagship store on Fifth Avenue would serve the interests of Saks Global’s creditors better than any cooperation with the Seattle-based retailer.
Recently, real estate developer Richard Baker, a former Saks Global CEO, invested $300 million into renovating the flagship store, which featured a new escalator designed by Rem Koolhaas. Baker resigned from his position just before Saks filed for bankruptcy.
A Texas judge dismissed Amazon’s attempt to release $400 million in restructuring funds for Saks Global on the same day, which added to the complexities of the situation.
Experts indicate that the legal dispute is likely to extend due to the future of the well-known luxury retailer being highly uncertain. “The fight between Saks and Amazon has just begun,” noted David Wonder, a partner in a bankruptcy law group. “Amazon’s opposition raises significant concerns about the current DIP financing.”
Both Saks Global and Amazon have refrained from commenting on the court’s ruling. Amazon has reported that the bankruptcy plan renders almost $500 million in their stock “worthless,” prompting the e-commerce giant to pursue claims of “management misconduct,” as mentioned in a letter from its general counsel to Saks Global.
In 2024, Amazon secured a 23% stake in the company formed by Saks, which acquired Neiman Marcus, significantly aiding its $2.7 billion merger. In exchange, Saks Global agreed to sell luxury fashion on Amazon.com and to pay at least $900 million in fees for Saks-branded items over the ensuing eight years.
The agreement was secured by the valuable Fifth Avenue property, according to Amazon’s filing. However, issues arose as the merged department store suffered financial troubles, especially with payment delays to suppliers.
Saks Global raised an additional $600 million in financing from current bondholders in August, supported by their flagship real estate holdings. Amazon opposed this funding, arguing that it would dilute its investment.
Ultimately, a settlement was reached wherein Amazon is set to receive up to $475 million in “guarantees” using real estate as collateral.
In the January 9 letter, concerns were raised that “Saks cannot utilize its assets and value.” It emphasized that the flagship’s financial takings were being funneled to other Sachs entities for the benefit of those creditors.
Despite a recent court approval allowing some DIP funds to be released, the conflict continues, with legal professionals suggesting the situation isn’t resolved yet.
Joseph Saracek, an attorney representing approximately 30 vendors owed money by Saks Global, commented that Amazon might escalate the matter to district court and appeal the judge’s choice on funding, indicating the ongoing contention.
Experts have noted that filing for bankruptcy in Texas was a strategic decision by Saks, as “debtors can secure favorable arrangements in Texas.” Nevertheless, most in the fashion industry seem inclined to support Saks Global, expressing a desire for its success, even among those who have faced challenges. “The industry is heavily investing in these retail brands,” stated Wonder, the bankruptcy attorney.
