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Neiman Marcus Delays Bankruptcy Hearing as Plan Hits Roadblocks

Neiman Marcus Delays Bankruptcy Hearing as Plan Hits Roadblocks

Objections from dissenting creditors are threatening to delay Neiman Marcus’s bankruptcy restructuring after the group said an acceptable plan must preserve the right of minority stakeholders to pursue legal claims related to a 2018 asset transfer.

The retailer asked U.S. Bankruptcy Judge David Jones to postpone a hearing on certain details of its plan to July 21 as it looks to address concerns from lower-ranking creditors.

Neiman filed for Chapter 11 bankruptcy May 7 after striking an agreement to let senior creditors take control of the chain. But lower-ranking creditors say the court must first allow a full investigation into a controversial asset transfer that shifted value out of investors’ reach and lowered recovery values.

The company’s plan, however, includes broad liability releases that would protect previous owners and directors, including Neiman’s private equity owners Ares Management Corp. and the Canadian Pension Plan Investment Board, from future claims.

A representative for Neiman Marcus declined to comment.

Some Leverage

The lower-ranking creditors drew up their own restructuring plan, which differs from Neiman’s namely in its treatment of the future liabilities, and asked the court for permission to formally submit it as an alternative.

The rescheduled hearing, which was originally set to take place Friday, will include a response to that request, according to an agenda filed with the court.

Under the bankruptcy code, Neiman has the exclusive right to submit a reorganization plan for the court to consider. Lower ranking creditors, represented by an official committee of unsecured debt holders, can’t push their own plan without approval from Jones.

Junior creditors have some leverage in the battle. The group is conducting an independent examination of the 2018 asset transfer and can draw out court proceedings based on their findings and at the discretion of the judge.

Their efforts could upset or delay the process for confirming Neiman’s restructuring plan and add to the bankruptcy process’s cash burn, said Bloomberg Intelligence analyst Negisa Balluku.

“Approaching a contentious plan confirmation process may be too risky for Neiman,” Balluku said in research note last month, adding that the plan releases that shield private-equity sponsors from liability may be on the line.

The case is Neiman Marcus Group Ltd. LLC, 20-32519, U.S. Bankruptcy Court, Southern District of Texas (Houston).

To see the docket on Bloomberg Law, click here.

©2020 Bloomberg L.P.