Neiman Marcus Group is expected to file to bankruptcy “as soon as this week,” sources told Reuters, reporting that “the debt-laden Dallas-based company has been left with few options after the pandemic forced it to temporarily shut all 43 of its Neiman Marcus locations, roughly two dozen Last Call stores and its two Bergdorf Goodman stores in New York.” The reports come just says after the department store chain missed debt payments totaling millions of dollars, including one – in which the retailer owes nearly $80 million – “that only gave it a few days to avoid a default.”
Founded in 1907 in Dallas, Texas, Neiman Marcus has been experiencing falling sales and dogged rumors of prospective sale in recent years, with the Group’s business – which has grown to include off-price Last Call stores, Bergdorf Goodman, and fashion e-commerce site MyTheresa, the latter of which it acquired in 2014 – has been pegged as a likely candidate for bankruptcy, particularly in light of the Coronavirus. Despite showing “some improved selling trends last year,” speculation about its viability dates back before the onset of the global health pandemic as many retailers have struggled to evolve to meet consumers digitally-centered shopping habits, as well as a larger movement away from buying as much clothing as they had in the past.
Back in 2017, the company – which stocks an array of high fashion labels, including Tom Ford, Fendi, Gucci, Prada, and The Row at brick-and-mortar stores across the U.S. and online – aside plans for an initial public offering in favor of “exploring options,” including changes to its capital structure change or a sale of the company to offset its enormous debt load. A year later, matters were made worse when it was hit with an ugly lawsuit, in which Marble Ridge Capital, a Neiman Marcus creditor, accused the retailer of fraudulently transferring its European e-commerce division, including MyTheresa, to private equity owners, Ares Management and Canada Pension Plan Investment Board, and thereby, running afoul of the law.
In short, Marble Ridge, which filed suit in a Texas state court, argued that Neiman Marcus had engaged in a debut reshuffling scheme in order to prevent its domestic creditors from accessing an estimated $1 billion in assets.
Neiman Marcus responded to the suit by denying that it is “insolvent” and asserting that all of its stores are, in fact, profitable. The retailer asked the court to toss out Marble’s case, and lodged claims of its own, namely for defamation, citing Marble’s practice of “recklessly [making] false statements regarding the company’s compliance with its debt documents with the intent of damaging the company.”
It is against this background and given an increasingly difficult retailer landscape that “it’s in the best interests of the Neiman Marcus brand and its future and all parties involved if there is a Chapter 11 bankruptcy if possible,” a source told WWD last week of the ailing Group, noting, “You couldn’t really have a liquidation of the business in this marketplace,” said the source, referring to the impact of the coronavirus, in particular. “There are only three possible outcomes — the lenders operate the business, the business is sold to one party, or the business is liquidated.”
Once the group files for bankruptcy, Neiman Marcus, which has borrowed about $4.8 billion, “could attract interest from potential suitors seeking to pick up the company or some of its assets on the cheap,” ones of Reuters’ sources states. As of now, it is said to be “in the final stages of negotiating a [multi-hundred million dollar] loan with its creditors” to enable it to remain open, in some capacity, during the impending bankruptcy proceedings.
Share
