Neiman Marcus Creditor Group Counters ‘Devil's Bargain’ Proposal

(Bloomberg) -- Dissident bondholders are demanding Neiman Marcus Group double the preferred equity stake it’s offering in the MyTheresa unit to quell the rebellion sparked by the retailer’s asset-shuffling.

The holdout group said it wants a $500 million preferred equity stake in MyTheresa instead of the $250 million the company offered, according to people with knowledge of the developments. They also want the opportunity to buy new second-lien notes the retailer plans to issue as part of the deal, said the people, who asked not to be named discussing private negotiations.

The group, which includes litigant hedge fund Marble Ridge Capital LP and is advised by Brown Rudnick LLP, objected earlier this month to a plan that would give the retailer more time to pay its debt, but was also structured to benefit investors who made side bets against Neiman in the credit derivatives market. They derided the plan as a “devil’s bargain.”

The holdout’s proposal would also have a crucial impact on the derivative bets that helped fuel Neiman’s own deal. That plan called for adding a co-borrower on the exchange debt in order to widen the pool of securities tied to credit default swaps, increasing the value of those derivatives. The counter proposal would list the new unit, Neiman Marcus Group Ltd LLC, as a guarantor on the new debt instead of a co-borrower.

Representatives for Neiman Marcus and for the holdout creditor group declined to comment on the negotiations.

It is a race against the clock for Neiman’s sponsors, lenders and advisers who have been in active negotiations aiming to reach a consensual deal before or around the time Neiman’s earnings are released on Tuesday afternoon, the people said. The company scheduled a conference call to discuss its second quarter financial results March 12 at 4:45 p.m. in New York.

©2019 Bloomberg L.P.