C (3:16)

Lauren Sherman. So nice to see you and looking so chipper early in the morning. I love it.

B (3:21)

Thank you. Thank you. I'm getting up. I have 6am calls or podcasts every single day this week. So I've been going to bed very early and getting up at 5 which is fun. I love it.

C (3:32)

This is the best, best life LA lifestyle. I love it.

B (3:36)

Definitely. Did you have anything good for breakfast this morning?

C (3:40)

I'm enjoying my cup of Scottish tea which.

B (3:44)

That's nice.

C (3:45)

It's a sort of a low key buzz that keeps sustains me through the morning.

B (3:51)

That sounds.

C (3:52)

I do my important Puck work.

B (3:55)

Do you? It's very important. Are you filing today or did you already.

C (3:59)

I'm filing. I. I wrote it yesterday but I have to update it today. I don't like to miss deadlines.

B (4:05)

Yeah, you and I are the. Yeah, you and I are the one.

C (4:09)

Well, of course. And not just for this many reasons.

B (4:14)

You and I are the A students when it comes to filing, I've been told.

C (4:20)

Really interesting what you have to do every day. So you're.

B (4:23)

You're in a whole new world. Well, yes, but my big days. I always file the day before. Sometimes on like yesterday's Today, Rachel Strugatz publishes. I filed the top of it yesterday, but a lot of times I'll do the top in the morning if it's new, if there's news or whatever. But I like to file the big chunk the day before.

C (4:46)

Oh totally. No, no, you can't risk it. None of this sort of. Dylan, what am I gonna write about at three in the afternoon?

B (4:56)

What are you talking about?

C (4:57)

Just joking around.

B (4:59)

Just joking. I wonder what Dylan is writing about today.

C (5:04)

He's got a lot he can write about.

B (5:07)

Yeah, it's true. Okay, so you are here, yes. To talk about the last time you're on this podcast. And I hope that this is not the end of our collaboration. The good news is that Saks Global will be around for a long time in some iterations, so there will probably be more things for us to discuss. The. But we have been working together quite a bit on the sort of trajectory of this business which was formed with the acquisition of Neiman Marcus Group at the beginning of January 2025. And now it's looking like they are going to. So just for anyone who, I don't know who would be listening to this, who wouldn't know this, but Saks Global includes Neiman Marcus, Saks Fifth Avenue and Bergdorf Goodman. And, and do you want to kind of set up what happened at the beginning of 2025 and where we are now and why? I felt like it was time for you to return to the podcast to explain what may happen next. Right now we don't exactly know, but can, can you start from the beginning and give us the elevator pitch of what happened the past year?

C (6:22)

Sure. Well, first of all, it's nice, nice to be back considering my last appearance was so well received by the folks at Saks. So I'm hoping they will receive this equally well. I mean, it really goes back to the premise of the deal itself, Lauren, and the way it was structured. Neiman Marcus itself had been in bankruptcy and come out of bankruptcy and was owned by his creditors, who I'm sure were eager to have somebody, as you reported so well for so long, eager to have, to have somebody come along and buy it. And, you know, Richard Baker at Sachs, who owns Sachs, you know, stepped up. You know, he's also, you know, let.

B (7:14)

Me just interrupt really quickly to say that he has wanted to own both of these companies and for them to be a group for like 15 years. It's been his. And it was the dream of people who, before, who owned the business before Saks Fifth Avenue, before Richard owned it. This is like an inevitability. The consolidation of these, the two biggest luxury department stores in America was inevitable in many people's eyes.

C (7:43)

So. Yeah, right, proceed. And I think, you know, the strategic logic, I don't have any problem with the strategic logic. It really comes down to when it comes to, you know, the risks associated with, with the deal comes down to how it's financed, really. I mean, if they had used all equity, we wouldn't be sitting here talking about it today. We wouldn't have been writing about it all year long. But if you go back to how they financed it with, yes, some equity, but mostly debt in the form of a $2.2 billion essentially publicly traded junk bond that was upsized from 2, 2 billion because of the demand for it from the market. And why was there demand? Because they were offering an 11% coupon, which was pretty high in the scheme of relatively low interest rate environment. So that attracted a lot of attention. There's a lot of money, institutional money that was looking For a place to go and to get a return. So that bond was upsized and blew out and the deal closed. And then as you wrote, incredibly and perceptively, I mean, basically on the so called Valentine's Day massacre, when the men.

B (9:26)

More innocent time Bill.

C (9:28)

Yes. Wow. Yes, with a great name though. Well, but you know, honestly, maybe a more innocent time, but that moment it was clear and that was two months in to the deal, less than two months into the deal and they're already stretching payables. Now somebody like me who had done a lot of bankruptcy work when I was at Lazard, working on some of the biggest bankruptcies of all time, including Allied Federated and Revco and Woodward and Lothrop. As soon as people. Retailers start stretching payables, going from paying people in 30 days to 90 days and then saying, well, what we owed you from years past, we'll pay you in a true up in June or whatever that is, you know, a big, a big red flag from. In the financial community, maybe not, you know, in the retail community, whatever. But it was a big, big red flag.

B (10:30)

Yeah. I would say as a layman who covers business, but obviously doesn't understand the complexities of the debt structure the way you do. I was not freaked out by the 90 days. I thought it was a bad look for them because like all of these retailers don't pay on time. Like that's the whole thing. This model doesn't work. Like this is the fundamental thing. And I've talked about this with a lot of leaders in the fashion industry and I think most of them agree, some of them want to believe it does. It just, it doesn't work at scale, at the scale that they are at. You cannot have this many stores. You have one bad season of use. Neiman Marcus is a great example of like they were paying people on time because they were able to clear all their debt. But that wouldn't have lasted for more than a few years because you have one bad season where no one buys anything and you get behind. And even the independent stores that are able to stay in business for 20, 30, 40 years because it's only one store, you know, will have seasons or a year where they don't pay people. Like this is just. I get calls honestly on a weekly basis, this store hasn't paid me in six months. They owe me a million dollars. This is so common that when mark did the 90 day, we're only gonna pay in 90 days. There was a part of me that was like, you know, this model doesn't work. So I wanna give him the sort of grace of that good for him that he's kind of trying to reset it. On the other hand, as a reporter I've experienced I don't know how many of these bankruptcies at this point, like probably six or seven. And many shutterings I've liquidations, chapter 11, just stores closing and all that stuff. And for me also, what I couldn't understand from the beginning was like, and maybe you. I think this is something for our real fashion people who are not on the business side listeners. Like when you, whatever, get a junk bond, I don't even know how, I don't know if it's acquirer or whatever. A junk bond that big, you buy it that big.

C (12:55)

Well, you issue it. Yeah, well, the company issues it, the investors buy it.

B (13:00)

Is there a scenario where like the. I got a message from Global Debt Wire that basically said. And I might just quote them because it was an on the record quote. Let me find it. Tim Hines said the deal was built on aggressive earnings and cost cut assumptions that have not been achieved while the added leverage has proven difficult to sustain a structurally shrinking retail sector. And to me that's the sort of thing. Was there ever a scenario where this was gonna be fine, I guess, if the sales were really good?

C (13:42)

Well, look, the size of the bond depends on the amount of whether it's good or bad, whether it's risky or not, whether it's fatal or not, whether it's existential or not depends on the amount of the ebitda, the cash flow, the profits that exist to pay the interest and pay the principal when it's due. This was a very interesting situation because, well, as I said, the first red flag for people on Wall street who invest in debt and look at debt and think about distressed debt, you stretch payables an immediate red flag. So I knew immediately at that moment that there was potential trouble brewing. Then you look at the trading of the bonds itself and it traded down from par to like 75 cents on the dollar. So already. And the yield is now in the 20% range. And I'm trying to remember this, by.

B (14:48)

The way, but can you explain really quickly what any of that means?

C (14:54)

Sure, sure. And to the lawyers listening and combing over every one of my words here, I just want to make sure that I'm trying to reconstruct in my mind events from a year ago, but I believe so basically a bond that trades publicly, which this did, even though, and this is an important point, even though the company itself is Private. Like the equity is private. But this bond was issued publicly and trades publicly. But, and this is important because of the number of holders of the bond is below a certain threshold. They did not have to file any financial statements publicly with the sec. So their filings are private, but the bond traded publicly. And this is a very important point in this whole scenario. But let me just address your question about. So they stretch payables, which means, hey, that's a signal that, hey, we're having cash flow problems or cash management problems. Like, if we had plenty of cash, we would pay our vendors in 30 days as we agreed. But the fact that we are struggling with the in and out of the cash means that we're gonna stretch the payables and we're gonna just tell you that it's gonna. We'll pay you in 90 days instead of 30 days, which, you know, as you pointed out to all these people who are providing them with goods and services, that's a long stretch. And then for the people who we've owed money in the past, you know, we'll see you in June maybe. Okay, so that a big red flag then, the bonds? No, the bonds were issued at 100 cents on the dollar. In other words, when they were bought, people bought $2.2 billion worth of bonds and they were worth 2.2 billion. But this bond trades publicly, so people are buying and selling it. Not all the time, but it's a pretty big bond. And so it was being bought and sold. And as a result of the news that was coming out, because there was a dearth of publicly filed information. So the news was that they're stretching payables, being a big red flag. Bondholders said like, either I gotta get out of this or, you know. And so they tried to sell it, but they couldn't sell it for a hundred cents, though they ended up selling it at 75 cents or whatever. And you could see that the bond was immediately trading, you know, after this February 14th announcement began trading at a discount. And again, this is one of those bond comments that drive people crazy. But the yield on a bond is in inverse proportion to the price. So as the price goes down, the yield goes up. And what does that mean? That means that to compensate investors for the risks they're taking, they need to have a higher yield. They need to get paid more. So when a bond is trading at 75, when it had been issued at a par at an 11% yield, and now it's trading at 75 cents on the dollar, the yield is like 20%, which means that we need to. The combination of the price that I paid and the interest that I'm paid equals a 20% return. And that's an equity like return, not a bond like return. So already you could see that the market is saying, not Bill Cohen, the market is saying that this company is heading towards distressed territory. And that all through the summer, of course, the bond kept trading down and down and down and down until August, when they did an exchange offer. Now, just one other point here. This business of not providing information about the company to the public. Right. So there was a dearth of information about how the company's financial performance has actually been doing because they weren't required to file with the sec, which was fine. That was perfectly legal. Right. But that doesn't mean that there wasn't information. There was. So how do we get our hands on it? Okay, first thing to get your hands on was the bond prospectus itself, which is what they effectively promised people they would do as they were selling the bonds. So I did get that. And that revealed an unbelievable series of promises that they made about their financial position, which they weren't able to keep, which they just could not live up to. And then the next. When they did the exchange offer in August, there was another whole series of documents that were filed privately. And you could see that by August, they had completely missed what they had promised they were going to do in December. So the combination of the bonds trading down, the missed promises, the over leverage, you know, blah, blah, blah, everything you're used to with retailers, you know.

B (20:03)

Yeah, yeah. I mean, I saw the. Right. I just remember in May around the Met, thinking, this really reminds me of what happened at Barney's. I remember being on the phone with people from Barney's in July, and I think they filed in the fall. But they were like, it's gonna be fine. And I was like, it's not gonna be fine. This is a thing that is. It's. So you want. The fashion industry is increasingly not reliant on this model. I mean, it's unreliant on it at this point. Most sales of products in luxury are sold direct to consumer, and they don't need this. But the sort of myth of the fashion industry is reliant on this model. And they. I mean, it hasn't worked since the 1990s. Like, it hasn't worked since the 1980s, since specialty retail took over department stores. And so.

C (21:05)

It'S even worked since Sears, Roebuck catalog. I mean.

B (21:09)

Exactly. Yes. That's when it started when I wrote my book about Victoria's Secret. We had a big section on this because Victoria's Secret was one of the big early specialty retailers, meaning that they only sold one thing and it was direct to consumer. And a lot of what. And they started with a catalog. A lot of what I wrote about in the research I did was about the like destruction of the department store in the late 70s when Gap and all these things and the, and the catalogs and the move to the suburbs. Like, it really. The move to the suburbs is really what like ruined the department store. And then in the 80s, it just by. If you look at how much stuff was bought at department stores in 1975 versus 1985, it's shocking. It was like some huge majority of stuff was bought at department stores. And then it was a. A vast minority in. By 85. It's crazy, the split. And so the thing that. So frustrating to me as someone who I talk to these executives all the time. They know that it's not a good model, but no one is trying to recalibrate because people like going to stores and enjoy that experience. So like, how can they create.

C (22:28)

There's. There's all these stores, there's all these boxes. I mean, look what Eddie Lampert tried to do with Sears and Kmart. And I written a bunch about that for Vanity Fair, including interviewing Eddie once upon a time. But I mean, he tried to refashion the lower end of the big box store industry and it didn't work.

B (22:55)

To me, it's quite clear that it's about scale. And so you can have. New York is a great example. Even in New York City, Neiman Marcus couldn't succeed. I mean, it was in that Hudson Yards, which was a disaster. You know, it opened right before retail did zone. Yeah, I think it's actually fine now, but it opened right before the pandemic. But like, you can have a Bergdorf, a Sachs, Nordstrom does okay there. But I think if that family could. Look, they signed the deal in 2013 and opened right before the pandemic. I think if they could go back, they probably wouldn't have opened in New York. Nordstrom, Sachs, Barney's, Bergdorf could do Barneys, Bergdorf Sachs fine in New York City, the biggest city in America here in la. Like, there's no reason. There's no one, no one goes to these places anymore. And so you need to have. The scale needs to be much smaller. And none of the big brands rely on these things for distribution anymore anyway. It's all marketing. And you have one or two stores in each city. It's very obvious. And I think the thing to me that is shocking is Richard Baker is a real estate person. He understands that. He did that amazing deal with, for the Lauren Taylor building. He sold it to wework. He made tons of money.

C (24:21)

It's very clearly an anomaly.

B (24:25)

Clearly. But it's very clear to me he's.

C (24:28)

Had his problems with Hudson Bay, which has been liquidated.

B (24:32)

We should acknowledge that this summer, Hudson Bay, the oldest retailer in the world, and I believe the oldest business in Canada, was liquidated, which Baker also owned. It did go to liquidation. But I think the challenge is the thing about people in the fashion industry. And I can't speak to Richard Baker, I do not know him. But the challenge of people in the fashion industry is everybody thinks fashion is about being ahead of the trends and understanding culture and seeing things. But most people who work in the fashion industry are lemmings and uncreative. And that's on the executive and creative side. Like they will fall. They just follow the trends of what other people are doing. And I think they were very afraid. The, the wholesale model is seductive. You can make a lot of money if it's going well. And so there are all these ways to like also make money and profit off of the fact that it's not successful. Like you can loan brands money to upfront. You know, there's, there's all these ways to make money off of, even though it's like a faulty model. And I think I'm hoping that whatever happens at the end of this, that everybody's like, okay, this is actually finally our chance to reset and stop. Because when Neiman Marcus went bankrupt during the pandemic, which many, many companies filed for chapter 11, the thing that they did wrong was that they didn't close enough stores. I was talking about this with someone yesterday. They should have closed it's 75% of their stores and just kept the top performing, the really profitable stores open. But instead they bought a ton of inventory to fill these underperforming stores. And now, and that's part of the reason this happened too, was that they had all this inventory. They didn't. No one, no one is like, okay, how can we actually make this like a hugely profitable business? Nobody is thinking that way. They're all just thinking like, how do we get volume? I think they've all been thinking about. Anyway, I went off track there for a minute.

C (26:52)

Well, I mean, it's important to remember that this is, as you said, A long term trend and problem. I mean Bloomingdale's was part of Federated went bankrupt. Macy's went bankrupt. Macy's bought, you know, Federated out of bankruptcy. I worked on the Allied Federated bankruptcy In the early 90s, you know, as a, as a banker, right, as an advisor. So you know, as soon as, again, you know, as soon as the Valentine's Day massacre occurred and the bonds traded down, I immediately knew that, you know, we had an Allied Federated situation, a Macy's situation, a Revco situation. I mean this is unfortunately it was constructed with too much leverage and too many promises that couldn't be met about synergies and you know, inventory adjusted ebitda. I mean, you know all that stuff that they put in their bond prospectus which showed that it was kind of built a little bit on a house of cards. And I mean this is what everything is. That's why we're. But I don't think, look, just like with Allied Federating with Macy's and what's going to happen here, assuming they can get their dip financing and they filed for chapter 11 is that just like with Neiman Marcus, the creditors will convert their debt to equity and they'll take over the company and they'll probably close some stores as you're suggesting and hopefully clean up their balance sheet, clean up and emerge out of bankruptcy, owned by the creditors in X amount of time and live to fight another day.

A (28:52)

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B (29:36)

So let's talk about what's happening right now. We're recording this very early on Wednesday. This will be published very early on Friday. There is a huge chance that between now and then something is going to happen here that they might file that or get a bailout or whatever. I don't think the bailout thing is happening but it's a possibility or something else. So let's go over because many people aren't going to know what dip financing is. So like let's talk about what. So they are at this point. So Mark Metric leaves the business right before he's a CEO of Saks Global. He leaves the business right before the end of the year. It was odd because of the fact that Richard Baker became the acting CEO. He's never had an operational role at, I don't think, any of his businesses, at least not at Saks Global, that's for sure. So he becomes the CEO. Usually when a company files for chapter 11, and if they get this debt financing, a restructuring executive comes in and kind of manages the business for a year or whatever, and. And then they hire executives to run the business after it's, like, restructured. It was unique that Mark left before the filing, I thought, and before the end of the year. Why he. Why that happened, I truly don't know. And maybe someday I will. The point being that it started to emerge. They kept denying, denying, denying. It started to emerge that they were. They started. There was leaking in. In the market by whomever of that. They are going to file for chapter 11. My sources on the fashion side were like, they're going to file the first week because they don't have any inventory. And if they want to run these businesses in the spring, they're going to need stuff. No one. I mean, that is. I'm being hyperbolic, but many, many companies are not shipping product to them at this point. Point. So Chanel just closed a bunch of their concessions. They're not even a wholesale partner, so it's really happening. They don't have enough product. They have not. It's January 7th. They have not filed for chapter 11, and there is no communication. One vendor's called the silence deafening. There's no. Mark was the one who was communicating with all the vendors. No one communicating with them. I'm sure a couple of the top vendors are talking to Richard, but, like, not many of them are getting communication. The question for you is like a. Why have they not filed for chapter 11 if that's inevitable? If it's not inevitable, what else could happen? Let's start with that.

C (32:26)

Okay, well, again, I don't want everybody to be mad at me, but it is inevitable, and it has been inevitable for some time. But the exchange offer, they successfully executed it. But the bonds that were newly issued as part of that have already traded down well into distressed territory. You know, as you know, vendors are not shipping, you know, retailers. I mean, I've had people say to me, oh, well, they're going to file before Christmas. And I'm no, they're not going to file until January because that's what Basically retailers do they wait and see how Christmas comes out? You know, that's sort of their last best hope. And I don't know how it worked out because they don't have to share information. But anecdotally in the market it's clear that they have to file. They didn't make their bond payment at the end of the year in December, as was predicted that they wouldn't do, which is one of the first smart things that they've done and from a financial balance sheet perspective. And they're probably looking for what's called debtor in possession financing, which is new financing that is provided by investors, banks, insurance, whatever it is. They put together a loan called a debtor and possession loan, which then sits at the top of the capital structure in bankruptcy and allows them to buy inventory and manage their receivables and payables. In other words, it allows them to conduct their business in the ordinary course so the vendors know they're gonna get paid. So they'll ship product and it just sits at the top of the capital structure. It gets paid, it's the top priority. Then there's all the other debt that was pre bankruptcy debt that basically gets stayed. It's not paid. Interest is often not paid, depends on security issues. Which gets back to that exchange offer that was done in August, but we don't have to get into that. So the DIP financing will definitely get paid. It'll get paid 100 cents in the dollar, although that doesn't always happen. There's examples in first brands where the value of the dip is actually traded down because of problems in the business. But assuming that we don't have that kind of situation here, they may not have gotten that DIP financing yet, which is probably why they have not filed yet. They also have a 30 day grace period on the bond, interest payment on the bond, which they're probably using this 30 days since December 30th to get their house in order. There's a complicated legal filing that has to be made with the bankruptcy court. You know, I'm sure that by now they've hired financial and legal advisors, if they're not the same ones that they had for the exchange offer in August. So, you know, there's a lot of things to pull together. You know, as you said now Mark has left. Now in the old days, by the way, they didn't bring in these restructuring CEO types. They let the existing, by and large, the existing management stay in place. But that seems to have gone out of fashion. So Mark sort of Drove them into the ground. He has to go, there'll be somebody new that comes in. Richard Baker, as you said, isn't a retail executive. So they have to find that person. They have to have a contract with that person. There's all these first day papers that have to be written and filed.

B (36:33)

Sure, I understand all that, Bill, but they don't have anything to sell people. What I do know is they have.

C (36:40)

They will, they will once they get this dip financing.

B (36:42)

I know, but this stuff takes time to get to stores. Like I am shocked that it hasn't happened yet. Like, I think the end. I understand that they have that 30 day grace period, but yeah, it just.

C (36:59)

Takes time, Lauren, to get these pieces in place. And so, yes, you know, as an operating retailer you want of course vendors to ship you products so that you can sell it in your stores. Yeah, but you know, we're in this weird, you know, interregnum period where I know nobody's going to ship unless they know they're going to get paid. Right.

B (37:20)

A lot of them haven't been shipping for months and a lot of them are moving that inventory to Nordstrom and Bloomingdale's right now.

C (37:27)

And no surprise. And so that's a pro. That's a problem for Saks. They, you know, if they want to keep, not be put into chapter seven liquidation, you know, they need to get this dip financing in place. Nobody's going to ship before bankruptcy because then they be, then they take a number and get in line. At least if they ship after bankruptcy, there's a dip financing and they know they'll get paid.

B (37:50)

Yeah. Okay, so the question for me is what if they cannot get together this dip financing? I assume that they can. And there, there's also been like, there's been tons of rumors in my side of the world of them doing some sort of deal with abg. ABG is not going to bail them out. That's not how Jamie Salter works. There's also been. Amazon's an investor. Could there be some sort of bailout with Amazon? I think, I mean my common sense and you can speak to this, any of these people are not going to do anything until they've restructure. Like, why would you take on all this insane debt? It just doesn't make sense to me. So I think that stuff is like wishful thinking. And you know, someone said there's always.

C (38:36)

Something that's explored, you know.

B (38:38)

Yeah. And like, and someone said basically Bezos came in. I don't know if that's True. And also, like, whatever. It just. It's. It is what it is. But the point being that, like, what if they can't get the DIP financing? Is there a world where this does end up in liquidation? Because that. That would be really bad for fashion.

C (39:00)

For the fashion industry.

B (39:01)

Except for lvmh, who is able. When Barney's liquidated, they were the only company that were able to pull their product out and not like, there were signs up at Barney's that were like, everything is basically free except for these 10 brands. And it was just all LVMH brands.

C (39:21)

So of course there's a scenario where they don't get DIP financing and they go into liquidation. Just like Hudson Bay. How sad is it that Hudson Bay went into liquidation? Honestly, that's sadder than Sachs having to go into liquidation. It's been around since the 1650s or whatever. So of course there's a scenario where that happens. You probably know better than anywhere that retailers get liquidated all the time because they can't get the DIP financing. But I would say in this case, look, there's a lot of leverage on this thing already. There's probably not a lot of unencumbered assets, but definancing is pretty profitable. The Apollos of the world love this kind of situation. The existing creditors already proved insanely that they were willing to put more money into this thing last August as part of the exchange offer. So, I mean, it could be that, you know, in for, you know, a dime, in for a dollar at this point. So I suspect. But that doesn't mean it doesn't take time to get it and to negotiate it. It does take time.

B (40:43)

Yeah.

C (40:43)

And I think that's probably where we are. It's only January 7th.

B (40:47)

I mean, I really hope for the people who are listening to this that it's done by the time, whatever the outcome is, that we know more by the time this podcast runs. But I think you're probably right. Look, it just what I would say to the powers that be who are left at Saks Global is, like, the reason it was funny. Look, a lot of people are mad at Mark and are frustrated by him or thought he wasn't the right leader for that business generally, and, like, he kind of got that job by default, et cetera, et cetera. But then I had other people message me when he. When I wrote that he was leaving or that he. Yeah, that he was leaving by the end of the year, and they were like, he's the only person that got me paid. So at Least he was like, communicating with people. And I think at this point there's probably like Gary Wassner, who runs Hilden, the factoring firm that does a lot of other stuff too. He sent an email to his clients a couple of weeks ago, I mean, a couple of days ago that said they're not communicating with us and they really can't because of. I think it's just because at this point they don't know what's gonna happen and they don't wanna say anything that's wrong or I'm sure legally they can't really speak. But I think the brands are just, at this point just like, oh, my God, this is crazy. You already owe me, in some cases millions. And there are a few that it's more than millions. It's like tens of millions at least. So I think the estimate was that they. It's something like over $500 million they owe to vendors at this point.

C (42:34)

So they become general unsecured creditors.

B (42:37)

Yeah.

C (42:37)

And they take a number and, you know, see how it works out.

B (42:46)

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They don't know what insurance is.

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My final question for you is, as someone who's worked on a lot of these deals and have been covering this kind of. This kind of business for a long time, like as an executive, As a lawyer. Wait, no. Banker and a lawyer. Banker, not a lawyer. I'm sure there are a lot of bankers who are also lawyers, but As a banker. As a banker and then obviously as a journalist. The final question I have for you, Bill, is what do you think? How do you think they should. As someone who's covered this for a long time, I know your expertise is on the kind of inner workings of how the debt works and the actual structure of the business. How do you think they should structure the business going forward that is sustainable in the medium term? Like I don't think long term is a word that we can use in this business. It evolves too much and the consumer is changing too much. But like if you were setting this up, how would you set it up at this point?

C (45:01)

Get rid of, just, just have the, the, the, you know, in terms of you gotta reduce the debt is the bottom line significantly because you're not generating the cash flow to service that debt. So that was very clear here. That's why they're in the situation that they're in. So how do you do that? You've got to convert the bulk of that, whatever it is, 2.2 or 2.5 billion of bond debt to equity. And so all those creditors become the new equity holders. You just do not have that debt. That debt just gets converted to equity and the existing equity holders get wiped out. Sorry, Jeff Bezos, unless you want to buy this thing out of bankruptcy and then you can own the whole thing, you know, I mean, look, they can sell this thing out of bankruptcy if somebody wants to, if Jeff Bezos wants to own it or Mr. Authentic Brands, they can come in and buy this thing out of bankruptcy, which is a legitimate option. That absolutely can happen here. But if that doesn't happen, they convert the debt to equity and the creditors own this thing and close stores, close non performing stores and just completely rationalize the business down to something that can really operate well and clearly with a basically debt free capital structure, except for the ABL line. You know what you need to finance inventory and receivables.

B (46:35)

Okay, one final question. The dream, and this is something I've been writing about for years, the dream of my dream that I is that Bernard Arnault buys lvmh, buys Bergdorf. My dream is that Bernard Arnault buy Bergdorf Goodman. Because I think LVMH would be a good man.

C (46:54)

He's got over the whole street, he's got over fifth Avenue now.

B (46:58)

Yeah, he needs to own all those four corners. I mean the building itself, the Goodman family owns. I don't think that, that. I think they may.

C (47:08)

Everybody has their price, Lauren.

B (47:09)

Yeah, I think they May sell it? Probably not. I don't know to who. Like there's. There was a. They were definitely, there was definitely that they were talking to a real estate firm to kind of go in and buy it, buy out the lease that. I don't think the Goodman family now believes that that should be a store completely. I think that they are interested in it being a mix of a store and condos and things like that. Anyway, of course, the point being, what else is new? Do you, is there a scenario now where there's a carve out where Bergdorf gets sold? Because the other thing I was talking about with someone yesterday was the Tracy Margulies who runs Bergdorf Goodman. She was sort of passed. The narrative was that she was passed up for this big job like being Mark Metric's deputy at Saks Global. And I personally was like, oh, Bergdorf, that's the best job, but it's a much smaller business. So like, if you think about running Saks Global versus running Bergdorf Goodman, which is one store in a decent sized E commerce, it's just not comparable. But in the end then I was talking about it with someone yesterday. Maybe they gave her that gig because of the fact that she can run a business and they're gonna carve it out anyway. So do you think, is there a scenario now? Maybe it's not Mr. Arnault, but it's someone else, that Bergdorf will be carved out of this new thing? Because I just, at this point, I.

C (48:40)

Mean, if I were Bernard Arnault and if I coveted Bergdorff for years to add to my collection, this is the perfect opportunity to buy it. I mean, how could. If the creditors are going to own the company and LVMH comes in with a bid, if they want to pay whatever a billion and a half for Bergdorf, creditors are going to say yes. Because of course, the creditors only care about one thing that's maximizing the amount of money they can get, you know, back and minimize their losses. And, you know, selling these assets out of bankruptcy with a 363 kind of sale process could be one scenario here. Or maybe they'll decide, you know, with their advisors what's legal and financial, that the highest valuation here is to reorganize the whole company with less debt and operate it as a whole as exists now and that, that will, you know, become a public company and, you know, they'll, they'll own the equity and that equity will trade up and it'll be more valuable than, you know, they're trying. We've got a carcass here. There's a dead body on the ground here, Lauren. Okay.

B (49:56)

No, I've been writing this story for 15 years.

C (50:00)

That's right. Almost twice, actually, and maybe longer.

B (50:04)

You know, I. I did a story on Saks Fifth Avenue in 2009 about. In Forbes magazine that was like, this company's screwed. 2009. I wonder if I can still find it. It was in the magazine, so I bet it's still up.

C (50:23)

Is Macy's in Federated? I mean, is Macy's in Bloomingdale's? How would you characterize them? Are they viable? Are they.

B (50:29)

Interestingly, Macy's is run by this really great executive, Tony Spring, who used to run Bloomingdale's. And I think that he's closed a ton of stores. I don't know enough about that business at this point. I still think, look, they have a lot of debt, too. No one wants to shop at Macy's. Bloomingdale's is doing really well right now. Cause it's small and there's nowhere to go but up. And they have an amazing team that has made it interesting. And brands need places to go. And I think Nordstrom being taken private by a retailer investor who understands how the business works. It's still run by the family who founded it. I think they have. There's an opportunity there, but I think even Nordstrom will need to close some stores. I think they all need to. To close stores. But. But, yeah, look, like, I don't know. I'm. I'm a person. I never. I don't like to look back. I like to move forward. And so I think these places should close and then new things should open and just like, evolve. But that's just not how, you know.

C (51:32)

It goes back to Joseph Schumpeter and creative destruction. And that's where we are in the retail industry. And capitalism can be very ruthless. And this will sort itself out and the market will get what the market wants.

B (51:48)

Yeah. Yeah. Bill, this was fun. It's great to catch up with you, as always. What's our next project, though? We gotta. We gotta find one.

C (51:57)

Well, you know, I got. I've got Warner Brothers. Discovery has to resolve itself and then there'll be time for the next thing.

B (52:06)

For some reason, they put me on all those press releases. I'm honored.

C (52:09)

Lucky you.

B (52:12)

Good talking to you.

C (52:13)

Okay, thank you. Have a great day.

B (52:16)

Fashion People is a presentation of Odyssey in partnership with Puck. This show was produced and edited by Molly Nugent. Special thanks to our executive producers, Puck Co founder John Kelly, executive editor Ben Landy and director of editorial operations Gabby Grossman. An additional thanks to the team at Odyssey, JD Crowley, Jenna Weiss Berman and Bob Tabador. Did you know? Tide has been upgraded to provide an even better clean in cold water. Tide is specifically designed to fight any stain you throw at it, even in cold butter. Yep. Chocolate ice cream. Sure thing, barbecue sauce. Tide's got you covered. You don't need to use warm water. Additionally, Tide pods let you confidently fight tough stains with new coldzyme technology. Just remember, if it's gotta be clean, it's gotta be Tide.