Updated 9:19 a.m. ET May 2

While Saks Global has been moving relatively smoothly through bankruptcy court and is preparing to finish the process this summer, that doesn’t mean the lawyers will take a break. 

Debra Sinclair, the Willkie Farr & Gallagher attorney representing Saks Global, told federal bankruptcy judge Alfredo Pérez on Friday that the company agreed in principle to set up a litigation trust and seed it with a $20 million war chest to pursue potential legal claims. The final details over the trust are expected to be established soon.

“That trustee will be empowered to investigate, litigate and settle claims on behalf of the trust with the goal of obtaining recoveries for the beneficiaries,” Sinclair said. 

The trust came out of negotiations to finalize the company’s bankruptcy disclosure statement, which was approved by the court on Friday. That is a key document in the Chapter 11 process that the company will use to solicit votes for its plan of reorganization, which is already widely supported. 

Saks Global signaled confidence that its plan will be supported by creditors and approved by the court. 

“Today’s significant step forward demonstrates our continued momentum toward emergence this summer with a strong foundation for long-term growth,” said Geoffroy van Raemdonck, chief executive officer of Saks Global. 

“As we execute our business plan to achieve our financial targets, we will keep our customers at the center of everything we do,” he said. “Saks Global’s enduring role within the luxury ecosystem remains anchored in offering a true luxury shopping experience and providing our brand partners with unparalleled access to the luxury customer. We appreciate the confidence in our plan by key financial stakeholders and look forward to garnering additional support.”

The Saks Global on track to exit bankruptcy is a very different company than the one that limped into court in January. 

It expects to come back out with nearly $700 million of liquidity and plans to boost its gross merchandise value to $9 billion by 2030 with double-digit adjusted EBITDA. 

“With adequate resources to invest in our capabilities, customer experience and merchandise assortment, we are confident in our ability to drive profitable growth for Saks Global and sustained revenue growth for our partners in the years ahead,” van Raemdonck said.

In the trust, there are two groups of beneficiaries. Class A includes investors who put up the debtor-in-possession financing to see Saks Global through bankruptcy as well as pre-petition secured debt. Class B includes companies with unsecured claims, including brands that got left holding the bag for unpaid goods in the bankruptcy filing. 

The first $20 million of proceeds realized by the trust would go back to Saks Global to pay back the initial funding. The next $80 million would be split evenly between Class A and Class B beneficiaries. Beyond that, DIP holders and secured lenders would receive 80 percent of the proceeds, with the rest going to the unsecured creditors. 

Exactly how much unsecured creditors like vendors receive on what they’re owed will depend partially on whether or not the litigation trust drums up some money.

Already many vendors have received some of the payments owed. 

Saks Global said that, so far, it has “committed to pay more than $600 million of pre-petition claims to hundreds of partners considered critical vendors, including large fashion houses and smaller independent brands.” 

The company said it is also “working diligently to offer recovery on pre-petition claims to as many brands as possible, including small independent designers.”

“Within this total program, small and independent designers and fashion brands represent 46 percent of the total brands that have been offered recovery on pre-petition claims,” the company said. 

Already, the unsecured creditors in the case have been looking for potential legal claims and other sources of value at the company that they can tap into.

For instance, the creditors committee has sought information from Richard Baker, former Saks Global chief executive officer, and Ian Putnam, former CEO of Saks Global Properties & Investments, under bankruptcy Rule 2004. 

A separate special committee of parent HBC GP LLC has signaled support for the effort, saying it was “unable to secure the full participation” of Baker and Putnam. 

“The special committee believes that information and testimony from these individuals would be useful in the context of its independent investigation into the potential viability of legal claims,” the committee said. 

Baker has resisted the effort, arguing that the information is already available within the company, including communications with other executives, documents tied to the $2.7 billion deal to buy Neiman Marcus Group and information about former Lord & Taylor locations.