Macy's, JCPenney, Neiman Marcus, and now Saks Fifth Avenue: in just a few weeks, the four core pillars and anchor tennants of the US mall sector will file for bankruptcy.
While we previously reported that the former two retail icons had entered their bond grace period ahead of filing a formal Chapter 11 bankruptcy petition, on Wednesday afternoon Bloomberg reported that Hudson’s Bay Co had also missed its April payments on at least two commercial mortgage-backed securities that were part of $696 million in financing for Saks Fifth Avenue and other stores.
The securities, originated in 2015, were current until this month when the company missed interest-only debt payments totaling only $3.2 million, according to data compiled by Bloomberg and a person familiar with the matter. According to Bloomberg, the missed payments were on securities that financed 34 properties - 10 Saks and 24 Lord & Taylor stores. The Saks locations include Beverly Hills, California, Atlanta, Chicago and Miami.
Demonstrating the shock to the retail sector over the past month, almost 11% of retail CMBS loans were as much as 30 days delinquent this month, up from 1.7% in March, according to an April 23 report by the CRE Finance Council, a commercial real estate trade group.
Hudson's Bay, which aggressively rolled up the retail sector earlier this decade, operates chains of retail stores which have been hit hard by social-distancing guidelines that have frozen much the economies in the U.S. and Canada. Of course, the coronavirus crisis only exacerbated stress faced by department stores even before being forced to close, as shoppers increasingly shifted to online shopping. Now, those problems are getting worse.
As previously reported, Macy’s, which furloughed workers and shuttered stores, is exploring a rescue financing deal to shore up its liquidity. Neiman Marcus Group missed payments on some bonds this month, and late last week, J.C. Penney Co. also skipped an interest payment and huddled with advisers, with bankruptcy among the options under discussion.