A federal bankruptcy judge in Houston approved a settlement between Saks Global and Simon Property Group on Monday.

The agreement resolves a dispute that allows the retailer to maintain operations with its primary landlord after entering bankruptcy in January.

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Dispute Over Leases

The litigation began when Simon Property Group moved to reclaim and cancel two retail leases just before Saks Global filed for bankruptcy protection on Jan.

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The disputed properties included a Neiman Marcus store at the Stanford Shopping Center and a location at the Woodbury Common Premium Outlets.

Intense negotiations followed regarding the retailer's extensive real estate footprint.

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"To say that this is a hard-fought negotiation is quite an understatement, but I'm happy to report that we were able to reach resolution," said Allyson Smith, the Willkie Farr & Gallagher attorney representing Saks Global.

Terms of the Settlement

The agreement modifies terms for multiple properties while scheduling the exit of dozens of other storefronts.

The retailer is currently planning a summer exit as it closes approximately half of its Saks Fifth Avenue locations and the majority of its Saks Off 5th stores.

"The details of the settlement were deemed to be 'commercially sensitive,' but Smith said the deal did allow for the assumption of 29 leases, seven of which are on amended terms and termination of 34 leases."

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The restructured agreement alters financial obligations and structural commitments between the two companies to align with the restructuring goals of the retail brand.

"In addition to resolving the pending termination litigation, [the settlement] also preserves the relationship with Saks' largest landlord, as a result of the amendments the go forward lease portfolio better aligns with the go forward business plan," Smith said.

"It includes restructured economic terms, including certain capital expenditure contributions as well as certain amended lease durations."

The presiding judicial official indicated that the compromise serves as a viable path forward for the company's reorganization strategy.

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"[It was] an appropriate exercise of the retailer's business judgment that resolves a potential significant roadblock to confirmation, or at least confirmation with the business plan that the debtor's choosing," said Alfredo Pérez, Federal bankruptcy judge.