(Reuters) – Neiman Marcus Group is getting ready to hunt chapter safety as quickly as this week, turning into the primary main U.S. division retailer operator to succumb to the financial fallout from the coronavirus outbreak, individuals conversant in the matter mentioned.
FILE PHOTO: Customers enter and exit the Neiman Marcus on the King of Prussia Mall, United States’ largest retail procuring house, in King of Prussia, Pennsylvania, U.S., December 8, 2018. REUTERS/Mark Makela
The debt-laden Dallas-based firm has been left with few choices after the pandemic pressured it to briefly shut all 43 of its Neiman Marcus places, roughly two dozen Final Name shops and its two Bergdorf Goodman shops in New York.
Neiman Marcus is within the remaining levels of negotiating a mortgage with its collectors totaling lots of of hundreds of thousands of {dollars}, which might maintain a few of its operations throughout chapter proceedings, in accordance with the sources. It has additionally furloughed lots of its roughly 14,000 workers.
The chapter submitting may come inside days, although the timing may slip, the sources mentioned. Neiman Marcus skipped hundreds of thousands of {dollars} in debt funds final week, together with one which solely gave the corporate just a few days to keep away from a default.
Neiman Marcus’ borrowings complete about $4.Eight billion, in accordance with credit score scores agency Customary & Poor’s. A few of this debt is the legacy of its $6 billion leveraged buyout in 2013 by its house owners, personal fairness agency Ares Administration Corp and Canada Pension Plan Funding Board (CPPIB).
The sources requested anonymity as a result of the chapter preparations are confidential. Neiman Marcus and Ares declined to remark, whereas CPPIB representatives didn’t instantly reply to requests for remark.
Different division retailer operators which have additionally needed to shut their shops are battling to keep away from Neiman Marcus’ destiny. Macy’s Inc and Nordstrom Inc have been dashing to safe new financing, similar to by borrowing towards a few of their actual property. J.C. Penney Co Inc is considering a chapter submitting as a solution to rework its unsustainable funds and get monetary savings on looming debt funds, Reuters reported final week.
A chapter submitting could be a grim milestone that Neiman Marcus has spent the previous few years attempting to keep away from. It pushed out due dates on its monetary obligations final 12 months in a restructuring take care of some collectors, although the transactions added to Neiman Marcus’ curiosity bills.
A trustee for a number of the firm’s bondholders sued Neiman Marcus final 12 months, claiming the agency and its house owners robbed buyers of the worth of its luxurious e-commerce web site MyTheresa by shifting the enterprise past the attain of collectors in a company reshuffling. Neiman maintains its actions have been correct.
“In gentle of the numerous headwinds stemming from the coronavirus pandemic and our expectation for a U.S. recession this 12 months, we imagine the corporate’s prospects for a turnaround are more and more low,” Customary & Poor’s analysts wrote in a word final week.
“We proceed to view its capital construction as unsustainable,” the analysts added, reducing their credit standing on Neiman Marcus deep into “junk” territory. They mentioned the transfer mirrored the “elevated potential” of a debt restructuring.
As soon as it information for chapter, Neiman Marcus may entice curiosity from potential suitors looking for to select up the corporate or a few of its belongings on a budget, the sources mentioned.
Saks Fifth Avenue proprietor Hudson’s Bay Co explored a bid for Neiman Marcus in 2017 however didn’t pursue it, individuals conversant in the matter mentioned on the time. The Canadian firm was taken personal earlier this 12 months by a gaggle of shareholders led by its chief government Richard Baker, and it’s unclear if it stays or could be able to pursue a brand new bid.
A Hudson’s Bay consultant didn’t instantly return a request for remark.
FROM FASHION FIXTURE TO BRINK OF BANKRUPTCY
The primary Neiman Marcus retailer opened in Dallas, Texas, in 1907. It was opened by the Marcus and Neiman households, which determined to pursue the retail enterprise after contemplating and rejecting an funding in a little-known smooth drink on the time referred to as Coca-Cola, in accordance with Neiman Marcus’ web site.
The corporate expanded throughout the US and in 1972 it acquired New York Metropolis’s Bergdorf Goodman, itself based within the early 1900s, turning into a trend fixture for celebrities and rich clients looking for costly purses and clothes.
Like different brick-and-mortar division retailer operators, Neiman Marcus struggled in recent times to compete with low cost retail chains and a client shift to on-line procuring. Luxurious e-commerce corporations similar to Yoox Internet-A-Porter Group (YNAP) and Farfetch Ltd have added to the aggressive stress dealing with Neiman Marcus.
The coronavirus outbreak has pushed the corporate to the brink. Whereas it has requested some employees again to closed shops to meet on-line orders, these operations can not make up for misplaced gross sales in bodily shops.
Reporting by Mike Spector and Jessica DiNapoli in New York; Enhancing by Greg Roumeliotis and Sonya Hepinstall
