Struggling Neiman Marcus files for bankruptcy
Canada Pension Plan has stake in luxury chain
Neiman Marcus Group Inc. filed for bankruptcy after efforts to manage its crushing debt load unravelled amid the spreading coronavirus pandemic.
Creditors will take control of the luxury department store chain, according to plans outlined in a Chapter 11 petition filed in Houston. The move gives the Dallas- based luxury retailer a break by letting it stay in business while management works out a recovery plan.
The company, led by Chief Executive Geoffroy van Raemdonck, said it has support from a substantial majority of its creditors, who agreed to put up US$ 675 million to get Neiman Marcus through the court process. They’ll also provide US$750 million in exit financing.
When the company emerges from bankruptcy in early autumn, Neiman expects to see about US$ 4 billion cut from the company’s existing debt load — the legacy of a 2013 leveraged buyout by current owners Ares Management Corp. and the Canada Pension Plan Investment Board.
The turnaround will be complicated by the fact that its stores were shut and its workers furloughed to help stop the spread of the COVID-19 outbreak. Some of the stores have been partially reopened with the option for curbside-pickup, Neiman Marcus said in a statement.
Neiman Marcus manages more than 40 namesake stores across the U. S., two Bergdorf Goodman stores in Manhattan, two dozen Last Call locations and a Mytheresa in Germany. The latter is a brick- and- mortar version of its fast- growing Mytheresa online merchant.
Most of the company’s department-store rivals also suspended operations because of the virus, at a time when the whole industry was already ground down by years of shopper defections to online merchants.
Neiman Marcus has been trying to simultaneously spend more on luring customers while taming its debt load, with mixed success. The company reached a deal with creditors last year that put off the due dates on some of its debt to buy time for a turnaround.
It also shuffled Mytheresa to a place in its capital structure that put the business beyond the reach of creditors, creating hard feelings with some bondholders that still linger. Mytheresa isn’t part of the Chapter 11 process and will operate independently, the company said.
Van Raemdonck said in the statement the company was making progress on its
CHAIN HAS STRUGGLED FOR YEARS TO ADAPT.
turnaround before the coronavirus hit. “However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business,” he said.
Neiman’s unsecured creditors list is a who’s- who of luxury brands including Chanel, Gucci, Christian Louboutin and Burberry, according to court documents. Neiman owes between US$3 million and US$ 8 million to some brands, records show.
The chain “has struggled for years to adapt among ongoing secular changes facing the department- store sector, a circumstance that has deteriorated because of the operation disruptions from the coronavirus and recessionary conditions,” S& P Global Ratings analyst Mathew Christy wrote in an April 22 report.