Amazon Challenges Saks Global's Bankruptcy Plans

Amazon finds itself at odds with luxury goods retailer Saks Global's financial restructuring strategy as the company pursues Chapter 11 bankruptcy.

The conflict surfaced shortly after Amazon, a heavyweight in online retail, saw its $475 million equity investment in Saks Global dwindle into near worthlessness. Amazon insists a federal judge dismiss the proposed bankruptcy financing framework, which it argues could further threaten any potential recovery of its investment.

Amazon's legal representatives noted that Saks had not managed to adhere to its fiscal plans, resulting in rapid depletion of funds and accumulating further liabilities, leaving unpaid invoices soaring significantly. This situation unfolded just before Saks secured a $1.75 billion financing measure alongside its bankruptcy filing.

In the documentation provided to the Texas federal bankruptcy court, Amazon expressed its hope that Saks might address these issues, cautioning that if not resolved, it could enact more severe actions such as appointing a trustee or examiner.

The investment was initially made as Amazon was concluding the purchase of the Neiman Marcus Group for $2.7 billion. Additionally, a commercial agreement was forged for Saks to sell its merchandise through a special section on Amazon's website, "Saks at Amazon."

Per the arrangement, Saks agreed to remit a commission for every sale of its products on Amazon, ensuring no less than $900 million over eight years.

According to Amazon's attorneys, the proposed bankruptcy strategy poses a risk not just to Amazon but also to other creditors by potentially overwhelming Saks with debts. They argue the financial structure would excessively burden Saks with obligations while ultimately benefiting other entities, to the detriment of creditors like Amazon.

In contrast, a federal judge overseeing the bankruptcy conveyed provisional approval for Saks to initiate accessing its financing at a court assembly.

As of the last inquiry, both Saks and Amazon had yet to offer public comments regarding these developments when contacted by Business Insider.