SAKS EXCHANGE COMPLETE

Byline: David Lipke

NEW YORK — Saks Inc. announced Friday the completion of an offer to exchange its 7.25 percent and 7 percent notes due in 2004 for cash and new 9.875 percent notes due in 2011. Approximately $283 million out of $450 million in existing 2004 notes were tendered in the transaction.
Saks will issue approximately $141.5 million of new 9.875 percent notes due in 2011 and pay $141.5 million in cash to settle the exchange, which is set for October 4.
Saks had stipulated it would require the tender of more than 90 percent of the aggregate principal amount of the 2004 notes to complete the exchange, but waived that condition. The waiver was implemented so “we can move forward with the transaction,” said vice president and treasurer Scott Honnold.
Gerald Hirschberg, a director of corporate ratings at Standard & Poors, noted one underlying reason for the offering is the fact that Saks holds a bank facility maturing in 2003, which will have to be renegotiated. Moving the 2004 notes back to 2011 will make it easier for banks to accommodate a new five-year facility.
Both S&P and Moody’s lowered their credit ratings on Saks’ debt just a few days before the announcement of the exchange offer in August, as reported. The retailer’s debt now resides several notches below investment grade, according to the two ratings agencies.

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