BIRMINGHAM, Ala. (HedgeWorld.com)–Saks Inc. announced that it has received a notice of default from a hedge fund, which a spokeswoman declined to name, and that this notice, issued Tuesday, June 14, initiates a 60-day cure period.
The default notice was triggered by Saks’ failure to file with the Securities and Exchange Commission the 2004 10-K, or its first quarter 10-Q. Timely filings are required in the indenture for its convertible notes.
Saks has said that it expects to file the 10-K by September 1, 2005, and the 10-Q at approximately the same time. But the cure period will end August 13.
If the sixty days expire without cure of the default, the maturity of outstanding 2% convertible senior notes due March 15, 2024 (totaling US$230 million), will be accelerated. The company said that the hedge fund that sent the default notice holds more than 25% of these convertible notes. It also said that the acceleration of those notes could result in the acceleration of maturity of some or all of the company’s US$990 million of senior notes.
“We believe that we have adequate resources available in the form of cash on hand, the proceeds from the pending sale of certain assets to Belk Inc., and the unused portion of our revolving credit facility to fully retire all amounts that may be accelerated and to continue to fund our operations,” said Saks’ chief financial officer, Douglas E. Coltharp, in a statement.
The company announced in late April that although it will continue to operate its Parisian and Saks Fifth Avenue Enterprises business, it has plans to sell the Proffitt’s/McRae’s business to Belk, Inc., Charlotte, N.C., for US$622 million, and it is “exploring strategic alternatives for its northern department store division and Club Libby Lu, which could include the sale of one or both.”
In addition to the receipt from these expected sales, the company said that it has US$324 million cash on hand, and approximately US$650 million of unused capacity in its revolving credit facility.
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