Neiman Wins Against Marble Ridge as Judge Tosses Suit
(Bloomberg) -- A state judge dismissed a lawsuit that hedge fund Marble Ridge Capital LP brought against Neiman Marcus after the retailer had shuffled its assets.
Judge Tonya Parker signed the ruling on Tuesday which dismissed the lawsuit for “lack of subject matter jurisdiction,” according to a court document filed in Dallas, Texas. Marble Ridge, a debtholder, objected to Neiman Marcus’s moving its MyTheresa unit out of the reach of creditors.
“While we had hoped the court would rule differently on our standing to bring the fraudulent conveyance claims, this particular ruling does not address the key issues, which are the inappropriate transfer by Neiman Marcus of the MyTheresa assets,” Marble Ridge said in a statement sent to Bloomberg.
In the lawsuit filed in December, Marble Ridge alleged that the shuffle of MyTheresa constituted a “fraudulent transfer of assets totaling approximately $1 billion of value for no consideration.” Marble Ridge has also claimed the retailer owes more than it’s worth and was either insolvent at the time of the transfer or was made insolvent by the deal.
Neiman disputed Marble Ridge’s claims, saying the fund made a series of false public statements with the intent to harm the company and for other “improper uses.” In a statement sent to Bloomberg on Tuesday, the company said it is pleased with the judge’s decision to dismiss the lawsuit, and that it looks forward to “continuing to work with holders of more than $2 billion of its debt” to advance negotiations.
The luxury retailer has been in talks with creditors about a proposed transaction that would push out maturities on Neiman debt by three years. The preliminary deal calls for unsecured bondholders to swap their holdings for preferred equity in MyTheresa, the fast-growing German e-commerce unit, plus new debt that would give them a partial claim on that business. “These holders chose to engage in constructive discussions with the company rather than engage in a campaign of false and misleading statements designed to harm the company and disrupt those negotiations,” Neiman Marcus said in a statement.
Dallas-based Neiman Marcus is the latest retailer to face pushback over whether asset transfers unfairly deprive creditors of claims on assets if a borrower needs to restructure. The allegations echo complaints against retailers including PetSmart Inc. and J. Crew Group Inc., which transferred assets in a way that complicated restructuring talks.
“To the degree that some portion of MyTheresa is in the pot,” the ruling is “a partial success for the company and creditors involved in negotiations,” Noel Hebert of Bloomberg Intelligence said in an interview. “The key to a compromise is everyone has to feel like they won something and lost something,” he said.
The case is: Marble Ridge Capital LP v. Neiman Marcus Group Inc., DC-18-18371, District Court, Dallas County, Texas, 116th Judicial District (Dallas).
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