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Saks Owner Missed April Payments on Commercial Mortgage Debt

Hudson’s Bay has missed CMBS payments on part of its $696 million financing for Saks Fifth Avenue and other stores.

(Bloomberg)—Hudson’s Bay Co. missed April payments on two commercial mortgage-backed securities, signaling the retail industry’s woes are spreading to debt markets.

The securities, part of $696 million in financing for Saks Fifth Avenue and other stores, were current until this month when the company missed interest-only debt payments totaling $3.2 million, according to data compiled by Bloomberg and a person familiar with the matter.

HBC spokeswoman Nicole Schoenberg declined to comment.

The retail industry, already facing significant challenges, has been battered by the coronavirus outbreak, which has shuttered stores and pushed consumers even deeper into the embrace of e-commerce. Now, there are increasing signs that the brick-and-mortar pain is going to be shared by bond investors.

Neiman Marcus Group Ltd. missed payments on some bonds this month, according to a letter from an investor. J.C. Penney Co. also skipped an interest payment and huddled with advisers, with bankruptcy among the options under discussion. Macy’s Inc., which has furloughed workers and shuttered stores, is exploring a rescue financing deal to shore up its liquidity.

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.

The two delinquent CMBS in the HBC portfolio are a $371.2 million pool with a 5.17% coupon that matures in August 2022 and a $325 million pool with a 5.46% coupon maturing in August 2025.

The securities, originated in 2015, financed 34 properties - 10 Saks and 24 Lord & Taylor stores. The Saks locations include Beverly Hills, California, Atlanta, Chicago and Miami.

Toronto-based HBC, originally established as a fur trading company in the 17th century, was taken private this year, after selling off Lord & Taylor, the company’s European operations and flash-sale e-commerce company Gilt.

Efforts to turn around the company, including stores closures and an inventory revamp at the namesake Hudson’s Bay chain in Canada, have been slow to take hold amid the broader struggles of department stores.

--With assistance from Claire Boston, Natalie Wong and Sandrine Rastello.

To contact the reporter on this story: John Gittelsohn in Los Angeles at [email protected].

To contact the editors responsible for this story: Craig Giammona at [email protected]

Rob Urban, Christine Maurus

© 2020 Bloomberg L.P.

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