New start begins as Neiman Marcus’ bankruptcy exit OK’d

Neiman Marcus finally has the new start it’s needed for years.

The Dallas-based luxury retailer’s reorganization plan was approved by the U.S. Bankruptcy Court on Friday, saving the storied retailer from unsustainable debt and giving it a fighting chance in a constantly changing retail environment that has been complicated by the pandemic.

The reorganization was completed in four months and on a schedule that pays the C-suite and key employees bonuses. Neiman Marcus will emerge having shed $4 billion in debt.

Without the almost $300 million annual interest payments, the retailer is focused on becoming a profitable business with seven fewer full-line stores but with tools to grow back to its previous size and exceed it, Neiman Marcus CEO Geoffroy van Raemdonck said in an interview Friday.

“I’m very confident if you look back pre-COVID-19, we had positive comparable sales increases in seven of our eight quarters, margins were improving and we were focused on a new customer,” van Raemdonck said. “Pre-COVID we had traction.”

Once the pandemic hit and closed stores, employees, brands, vendors, creditors and new shareholders supported the reorganization process, he said.

“I’m amazed that we made it through this long summer with the pandemic and everything else. We’re so grateful for the support from our employees,” van Raemdonck said.

While the new company will be smaller, “what’s important is that we have a loyal base of customers and we can connect with them,” he said. “Size doesn’t matter; what matters is that we can achieve profitable and sustainable growth with our customers.”

The hardest part of the process were the decisions to do with employees and retirees. The new owners decided not to continue supplemental plans for about 300 to 400 retirees and current employees.

Neiman Marcus exits with a $750 million term loan from a group led by Credit Suisse and $1.29 billion in debt, down from $5.1 billion when it entered bankruptcy. Investment banking firm Lazard estimated the value of the company between $2.07 billion to $2.54 billion.

Van Raemdonck’s team is in place and 247 key employees will receive $18.95 million in bonuses that were targeted to an exit plan being confirmed on Friday.

So far three board members have been named: van Raemdonck, who has been CEO since 2018, and two women.

• Meka Millston-Shroff is a former chief customer experience officer at Bed Bath & Beyond who led the growth of Buy Buy Baby as president of that chain from 2007 to 2018.

• Pauline Brown, a former chairman of North America for LVMH Moët Hennessy Louis Vuitton, served on the boards of L Capital and several LVMH subsidiaries, including Donna Karan, Marc Jacobs and Fresh Cosmetics. Brown was also on the board of luxury e-commerce retailer Moda Operandi. She was a managing director at private equity firm Carlyle Group and held several executive jobs at Estee Lauder Cos.

The new board has seven members who are appointed by the new shareholders: the CEO, three members designated by Pacific Investment Management Co. (PIMCO), one director designated by Davidson Kempner Capital Management, one director by Sixth Street Partners and one independent director designated by a new equity holder.

The new owners of Neiman Marcus are huge asset managers and lenders.

• PIMCO manages $1.92 trillion in assets for central banks, sovereign wealth funds, pension funds, corporations, foundations and endowments, and investors.

• Davidson Kempner Capital is a New York-based global hedge fund with $34 billion in assets under management. Davidson Kempner is often listed as a secured bondholder in debt restructuring agreements, from Richard Branson’s Virgin Atlantic Airways bankruptcy filed in August to AMC Entertainment’s restructuring in July to stave off a Chapter 11 filing.

• Sixth Street was created by TPG in 2009 as an investment platform dedicated to credit-related investments. TPG, which was one of Neiman Marcus’ private equity owners who sold the company in 2013, separated from Sixth Street in May. Sixth Street operates independently with $47 billion in assets under management.