Neiman Marcus Considers Bankruptcy to Ease Crushing Debt Load

(Bloomberg) -- Neiman Marcus Group Inc., the luxury retailer that’s been struggling to ease its $4.3 billion debt load, is talking with lenders about filing for bankruptcy, according to people with knowledge of the matter.

No formal decisions have been made, but Neiman Marcus has held initial talks with lenders about a potential bankruptcy loan that would keep the company running while it works out a recovery plan, the people said. They asked not to be identified discussing a private matter.

A representative for Dallas-based Neiman Marcus declined to comment. A Chapter 11 bankruptcy filing would allow the company to keep its doors open, cut its borrowings and close weak stores to minimize costs.

The situation remains fluid and plans could change, depending on market conditions, the people said. This includes the impact of the coronavirus, with sales suffering because government officials are telling shoppers to stay home and nonessential businesses to stay shut.

Store Closings

Neiman Marcus temporarily closed its stores last week in response to the health crisis. It manages 43 namesake stores across the U.S., two Bergdorf Goodman stores in Manhattan, 24 Last Call locations and one Mytheresa in Germany.

Even before the virus spread, the company was struggling because shoppers were defecting to online merchants and consumer tastes were changing. It’s been trying to simultaneously spend more on luring customers while taming its debt load.

Like other retailers, Neiman Marcus is bracing for a slump tied to the closures. The company said it will continue to serve its customers through online channels, including a new selling and styling tool designed to help remote purchasing.

Debt has continued to weigh on Neiman Marcus, even after it was able to strike a restructuring deal with creditors last year that extended maturities and bought time for a turnaround. Its borrowings ballooned after leveraged buyout transactions including its sale to Neiman Marcus’s current controlling shareholders Ares Management Corp. and the Canada Pension Plan Investment Board in 2013.

Cash Holdings

Neiman Marcus reported around $38 million in cash as of the second fiscal quarter ended in February, the people said. But its available liquidity increased throughout the holiday season to around $439 million, to give it some breathing room and exceeding the retailer’s original forecast for the period.

At the end of the period, Neiman Marcus had $524 million of outstanding borrowings drawn on a $900 million revolving credit facility, to ensure it had enough cash on hand to continue operations, the people said.

The company’s roughly $500 million of third-lien bonds due 2024 trade around 18 cents on the dollar, according to Trace.

©2020 Bloomberg L.P.

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