July 13, 2025

Welcome back to Dry Powder. I’m Bill Cohan.

In today’s issue, a close look at the fresh round of creditor-on-creditor violence at Saks Global, instigated by a fairly impressive bit of financial jujitsu from the company’s executives and their expert team of advisors resulting in an exchange offer for its $2.2 billion of bonds. Plus, notes on the blistering S&P report regarding the deal, after the credit agency moved Saks Global’s credit rating last week to CC—deeper and deeper into junk-bond territory, and closer to default. But first…

Ackman’s game: As you surely know by now, the 59-year-old billionaire hedge fund manager Bill Ackman recently lived out his George Plimpton fantasy by donning his whites and playing doubles at the International Hall of Fame Open in Newport—a professional tournament. Ackman, of course, has been hyping his own game for years: You may remember all those headlines, a decade ago, when he succeeded in putting a tennis court on the roof of Pershing Square’s 67,000-square-foot office space on the West Side, above the Range Rover dealer. This time around, Bill partnered with 32-year-old Jack Sock, who was once a member of the world’s second-ranked doubles tandem. Alas, they got waxed by a couple Australians. Former U.S. Open champ Andy Roddick dubbed it “the biggest joke I’ve watched in professional tennis,” among other near profanities.Instead of discreetly playing the match and moving on, Ackman explained to his 1.8 million followers on X how this all came together. According to Bill, he had met the often underachieving and flamboyant former Wimbledon runner-up Nick Kyrgios on X, and the two cooked up a scheme to play doubles together in a pro tournament. Then Kyrgios got injured, dashing “our doubles hopes,” Bill wrote. Luckily, “fate intervened” and Sock, a doubles winner at both Wimbledon and the U.S. Open, scored a wildcard invitation to the Newport tournament, and invited Ackman to be his partner. “I of course accepted,” Bill wrote. Bill is the very definition of high beta. He’s made some hugely successful bets, such as turning his $27 million purchase of credit default swaps into a $2.6 billion profit during the early pandemic—in a mere three weeks. He’s also had his fair share of big losers (Herbalife, Valeant, etcetera). Amid it all, he’s demonstrated ample doth-protest-too-much vibes. Back in 2013, while I was profiling Bill for Vanity Fair, he told me that he didn’t get a 1600 on his SATs only because several of the College Board’s questions and answers were incorrect. (He settled for 780 verbal, 750 math, and entrance to Harvard, where he rowed crew before attending HBS.) He’s also been eager to share with me his personal best records on his home erg. In a way, though, his tests of his own mortality are part of the charm. Years ago, Ackman joined a serious peloton in Montauk alongside about six other dedicated riders, including fellow billionaire hedge fund manager Dan Loeb. Ackman told me that his cycling skills were a bit rusty at the time, but he nevertheless decided to set the pace. At mile 32 of the trip, Bill bonked, as the term is known, his energy depleted. He could barely pedal, with cramping in his legs. “I was in unbelievable pain,” he recalled for me more than a decade ago. He was conveyed back to his Hamptons estate with his tail between his legs, so to speak. Anyway, there’s already a brilliant 30 for 30–style spoof of Bill’s spectacular tennis flameout in Newport, featuring a voiceover of how “an everyday billionaire with a social media addiction could fulfill his dream of becoming a professional tennis player.” To Bill’s credit, he seems to have taken the ribbing in stride. “This is pretty good,” he wrote on X about the video. “The world needs more laughs (at my expense).” He’s right about that. Earlier today, he announced he’s setting up a $10 million endowment for the International Tennis Hall of Fame that he will manage for free, and to which he will contribute 5 percent every year. Of course, he couldn’t resist putting a positive spin on his brief foray on the circuit. “What people are missing is that the whole thing worked out perfectly,” he wrote. “My poor play dramatically increased the virality of the event, driving massively more coverage than if I had played well.”

And now, a quick update on Elon’s A.I. ventures from my newest partner, Ian Krietzberg. Sign up for his superb new private email, The Hidden Layer, here…

Ian Krietzberg

Here comes Grok 4…: On Wednesday night—before his X C.E.O., Linda Yaccarino, pulled the rip cord, and while his xAI team was still cleaning up the damage from an update that caused its Grok chatbot to respond to prompts with antisemitic and sexually violent comments—Elon Musk unveiled the latest version of what he dubbed “the world’s most powerful A.I. assistant.” On the surface, Grok 4 slightly edges out its competitors—o3, Gemini 2.5 Pro, Claude 4 Opus, etcetera—to lead the Artificial Analysis Intelligence Index, a benchmark that aims to grade chatbot capability. (Capitalizing on the news, Musk also announced a new $300 monthly A.I. subscription, SuperGrok Heavy.)Of course, the trouble here is that the model training data remains unknown; without assessing the underlying data, it’s hard to determine whether the model actually has the capability suggested by the Intelligence Index, or whether that model’s training data simply encompasses the questions on the benchmark. It’s the difference between genuine understanding, which is strong and flexible, and the illusion of understanding, which is brittle. In other words, many researchers are skeptical that these benchmarks actually measure what they claim. What is clear, however, is that benchmark performance does not necessarily relate to real-world efficacy, usability, or potential for harm. For example, the team made no mention of the electricity and carbon cost associated with training or running the model, and didn’t detail any innovations that might curtail hallucinations. Of course, none of that prevented Musk from making grandiose promises about Grok 4: “I would expect Grok to discover new technologies that are actually useful no later than next year, and maybe end of this year,” he said. “It might discover new physics next year. … Let that sink in.” I don’t know what “new physics” means, and if I were a betting man, my money would not be on Elon’s chatbot to discover it. But there is plenty of cash sloshing around the system. According to Crunchbase data, A.I. companies around the world raked in more than $40 billion in venture capital funding in the second quarter of 2025, nearly half of all global venture funding tracked by the service. It’s yet another massive quarter for the sector: In Q1, A.I. companies brought in $60 billion in funding, and in the last quarter of 2024, the sector brought in $44 billion. We’re several years into this race, and based on these results, there’s no reason to believe the V.C. spigot will be turned off anytime soon.

On to the main event…

Make-Up Saks

News and notes on the latest creditor-on-creditor violence taking place at Marc Metrick’s debt-stacked baby, Saks Global—including a new twist in the form of a potential big short.

William D. Cohan

I couldn’t help but be impressed by a bit of financial jujitsu that the executives over at Saks Global pulled off last week, all with the help of their expert team of advisors. Designed by the experienced duo of David Nemecek at Kirkland & Ellis and Jamie Baird at PJT Partners, Saks Global is in the process of executing an exchange offer for its $2.2 billion of bonds. The deal is expected to close next month.

Under the terms of the deal, you will recall, the holders of 54 percent of the Saks Global bonds (represented by Paul Weiss and Lazard) have agreed to provide Saks with up to an additional $600 million of new financing. In exchange, this slim majority of bondholders will move to the top of the Saks Global capital structure, leaving in the dust the other 46 percent of bondholders who weren’t as clever or speedy to become part of the majority—some good old-fashioned creditor-on-creditor violence, real connoisseur-level stuff. In a chef’s kiss, the minority bondholders can ameliorate their plight by participating in the new financing, even if they won’t get the same deal as the 54 percent no matter what. But here’s where the real coercion kicks in: If these subjugated bondholders don’t participate in the financing, their bonds get stripped of all their covenants and shoved down to the bottom of the priority stack—a major problem in the event of a Saks Global bankruptcy filing, which remains a distinct possibility. Saks Global can orchestrate this quite legal maneuver against its own creditors because the original bond indenture, from December, permitted it. The creditors who bought those bonds may have been blinded by the possibility of an 11 percent yield, but they had full knowledge of this possibility, assuming they read the paper or listened to their lawyers.

The D-Word

So far it’s going over like a lead balloon, as they say. S&P Global, the credit rating agency, shit all over the deal, to use technical language. On July 8, S&P Global cut Saks Global’s credit rating from CCC+ to CC, deeper and deeper into junk-bond territory and closer and closer to default.

In fact, the S&P analyst who wrote the report, Frederico Carvalho, did not shy away from the D-word. “The downgrade reflects our view that the proposed financing transaction is tantamount to a default,” he wrote in the first sentence of the report and in a bold font. As a result of the deal, he added, the bondholders “will receive less value than they were initially promised and will rank lower in terms of priority than the new money notes following the completion of the transaction”—which of course is a polite way of describing the creditor-on-creditor violence that has occurred here. (Carvalho did not respond to my request to discuss his report.) Carvalho wrote that he expected Saks Global to report negative free operating cash flow for the next two years, and to continue to “heavily rely” on its existing asset-based lending facility to operate the business. He wrote that although Saks has $4 billion worth of real estate assets “on a net basis,” it has been unable to “monetize” these assets in a timely fashion to meet its “financial commitments.” What’s more, he wrote, S&P Global plans to downgrade Saks again to “SD” (selective default) or “D” (default) when the exchange offer closes next month. Carvalho elaborated that he would spare Saks Global the default credit rating, and upgrade its credit back to the still-dicey CCC category, only if the company decides to abandon the exchange offer and explore other restructuring alternatives—a very unlikely scenario at this point. Obviously the S&P Global downgrade was not good news for Saks Global, and Marc Metrick, the Saks Global C.E.O., knew it. Just as the report started to circulate, Metrick issued a statement to Saks’ “valued partners” declaring that the company had “made progress” in “executing our transformation strategy.” He wrote that he hoped the new “up to” $600 million of new financing would inspire “confidence in our ability to grow together.” The S&P downgrade, he said, was based “on formulaic and technical criteria,” with the implication that it was no big deal and that the use of the “selective default” rating was “also common for transactions of this nature.” I’m not sure I’d be so flippant about the meaning of the downgrade and the use of the word “default.” The truth is that Saks Global remains on the precipice. But Metrick was correct that Saks has not had a payment default. The company made its $120 million interest payment at the end of June, and “remained committed” to paying its overdue vendor bills, as it pledged to do in February. “The S&P actions have no impact on our day-to-day business operations,” he wrote, “or how we drive our business forward.” He concluded by expressing hope that S&P would upgrade Saks’s credit rating after the transaction—pretty much ignoring the fact that the report said S&P intended to further downgrade Saks’s credit rating if it executed the debt exchange. (A representative for Saks didn’t respond to a request for comment.)

The Big Short

As I told Puck’s fashion expert, Lauren Sherman, earlier this week, I’m afraid this all adds up to wishful thinking on Metrick’s part. I know he’d like everything to be resolved as a result of his bondholders ponying up some $300 million the other day—$180 million net of the $120 million interest payment. But big hurdles remain. He’s got to pay his vendors the overdue money he owes them, as he said he would during the Valentine’s Day Massacre, when Saks informed its vendors that it was renegotiating their payment terms. There’s also the $500 million debt refinancing that must occur in August related to one of the company’s mortgage-backed securities. That may or may not require Saks to put in additional equity, based on the appraisal of the real estate, to refinance that debt.

And, of course, come December there will be another $120 million interest payment due. You might think that the new capital infusion and the exchange offer would lead the Saks bonds to rebound. But you’d be wrong. The bonds now trade on a bifurcated basis: The ones getting the security upgrade and providing the new money initially traded up to 60 cents on the dollar, as I reported last week. But they’ve since fallen back to 50 cents on the dollar. The bonds potentially getting stripped of all their covenants and shoved down to the bottom of the capital structure are stuck at 35 cents on the dollar. Neither price is an indication that the company’s bondholders share Metrick’s conviction. I contacted a smart bond investor to try to get him to help me understand this trading reaction to the big announcement. He told me the S&P downgrade didn’t move the bonds downward. Why would they trade down then—unless, of course, Saks Global remains in financial distress? “The latter,” he wrote. “It sucks.” Groups of smart hedge fund investors have shorted the Saks bonds and tell me they are determined to ride them all the way to the bottom.

The industry's go-to source for unflinching reporting on the trillion-dollar business of artificial intelligence - perhaps the single most important technology of our time. Ian Krietzberg, the powerhouse journalist behind The Deep View, delivers twice-weekly insights into the latest dealmaking and breakthroughs in A.I., and how the intersecting worlds of finance, entertainment, media, and politics are being transformed in its wake.

Join Puck’s chief political columnist, John Heilemann, as he roams the corridors of power and influence in America on this twice-weekly interview show, taking you beyond the headlines with the people who shape our culture: icons and up-and-comers, incumbents and insurgents, moguls and machers in the overlapping worlds of politics, entertainment, tech, business, sports, media, and beyond. The conversations are rich and revealing, unrehearsed and unexpected… and reliably impolitic. A Puck-Audacy joint, new episodes drop every Wednesday and Friday.

Amazon’s OpenAI Shocker

MATTHEW BELLONI

Rubio’s Vanishing Act

JULIA IOFFE

F1’s Rights Race

JOHN OURAND

Need help? Review our FAQ page or contact us for assistance. For brand partnerships, email ads@puck.news.

You received this email because you signed up to receive emails from Puck, or as part of your Puck account associated with {{customer.email}}. To stop receiving this newsletter and/or manage all your email preferences, click here.