Luxury Retailer Neiman Marcus Files For Bankruptcy After Reaching Agreement With Creditors

Ares Management Corp ARES co-owned high-end retailer Neiman Marcus has become the first large department store chain to file for bankruptcy.

What Happened With Neiman Marcus

The retailer announced Thursday that it had entered into a restructuring support agreement with a “significant majority” of its creditors to undergo financial restructuring. Neiman Marcus will file for Chapter 11 bankruptcy at the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division. 

The restructuring is an effort to substantially reduce its debt burden and interest payments while continuing operations through the current pandemic and beyond. The agreement was reached with over two-thirds of creditors and Neiman Marcus claims it is a demonstration of “broad commitment across creditor classes.”

Expressing optimism for the future Geoffroy van Raemdonck, CEO of Neiman Marcus said, “We will emerge a far stronger company. In a world that is changing, we are uniquely positioned to give our brand partners access to our loyal luxury customers like no other company.” He added, “We will deliver that through the strength of our associate relationships and digital solutions.”

Why It Matters For ARES

The luxury retailer expects to emerge from bankruptcy in early Fall 2020. Neiman Marcus’ MyTheresa e-commerce business is not a part of the bankruptcy and would continue to operate independently, the company stated. 

Neiman Marcus has a debt of nearly $5 billion and was accused by a bondholder of moving its MyTheresa online business out of reach of creditors by the way of a corporate reorganization. 

The retailer's largest creditors have committed $675 million in Debtor-in-possession (DIP) financing during the bankruptcy proceedings. These creditors have additionally committed to a $750 million exit financing package that would fully refinance the DIP financing and infuse the business with additional liquidity.

There will be no-near term maturities upon emergence and the bankruptcy will eliminate $4 billion of existing debt.

Two of the company’s debtor entities, Mariposa Intermediate Holdings LLC and Neiman Marcus Group LTD LLC have a new board of managers in place to lead them out of bankruptcy. Each board is chaired by Van Raemdonck.

The high-end sector has been hit hard by COVID-19, J.C. Penney Company Inc. JCP is also negotiating bankruptcy, while Macy’s Inc. M and Nordstorm Inc. JWN are borrowing against their real estate assets. 

Price Action

On Thursday, Ares Management shares closed flat at $35.01.