BREAKING: Neiman Marcus Group Files For Bankruptcy, Plus A List Of Their Top Creditors

DALLAS, TEXAS — Last March 2020, DM Fashion Book reported the Neiman Marcus Group, impacted by its heavy debt load and the coronavirus pandemic, is “evaluating all courses of action” to preserve its financial health, including a possible bankruptcy (see it here).

Neiman Marcus Group is owned by Ares Management LLC and the Canada Pension Plan Investment Board, which together bought the business for $6 billion in 2013, bringing long-term debt up to $4.46 billion.

Today Thursday May 7, 2020, WWD reports “Neiman Marcus Group began its long-anticipated bankruptcy proceedings on Thursday as the coronavirus shutdown sped up the retailer’s cash crunch, which has been building for years“.

“The luxury retailer filed for Chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas having lined up $675 million in debtor-in-possession financing and a binding restructuring agreement with lenders holding over two-thirds of the company’s outstanding debt. The filing follows the department store’s evident liquidity troubles, as it missed interest payments on bonds“.

Creditors have also committed to a $750 million financing package to exit bankruptcy and continue its evolution.

Some of fashion’s biggest names were left hanging with the bankruptcy and are owed millions of dollars, including Chanel Inc. (owed $6 million), Veronica Beard ($4.3 million), La Mer ($3.5 million), Gucci America ($3.2 million), Dolce and Gabbana USA ($2.7 million), Stuart Weitzman ($2.6 million), Theory ($2.5 million) and Christian Louboutin ($2.3 million). You could see the full list on the next page.

The plan is to finish pushing Neiman Marcus through the Chapter 11 process in the fall and eliminate $4 billion in debt along the way, leaving the company in the hands of its current lenders.

Geoffroy van Raemdonck, chairman and chief executive officer of the company, said: “Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth. We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omni-channel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform. However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business“.

“The binding agreement from our creditors gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation,” the CEO 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. We will deliver that through the strength of our associate relationships and digital solutions.”

Prior to the filing, Neiman Marcus Group and the associated Mariposa Intermediate Holdings were set up with new boards to lead the restructuring process. Both boards are chaired by Van Raemdonck.

Mytheresa, which Neiman Marcus’ prior owners shifted away from the retailer in a move contested by some lenders, is not a part of the bankruptcy and will continue to operate independently.

While the filing does pave a way for the company to lift its crushing debt load, answering a key question that’s loomed for years, the road ahead through the COVID-19 crisis is still extremely uncertain for Neiman Marcus and the rest of retail.

The company said its stores — including Neiman Marcus, Bergdorf Goodman and Last Call — would remain mostly closed for the rest of this month, extending furloughs and salary reductions.

Since its 2013 acquisition by Ares Management LLC and the Canada Pension Plan Investment Board, NMG has borne roughly $4.5 billion in debt, servicing it with some $300 million in annual interest. The company runs 43 Neiman’s stores and two Bergdorf Goodman stores, as well as an online business that includes neimanmarcus.com, bergdorfgoodman.com, and the Mytheresa luxury web site.

For vendors, in particular, a foremost concern would be whether Neiman’s would be able to pay its bills during the bankruptcy, and what sort of assumptions the retailer is making about its ability to reopen any stores it plans to keep.

The filing highlights some of the biggest challenges facing retail during the COVID-19 pandemic. It’s difficult to court potential buyers, or even to make reliable revenue projections, while stores are still closed. And it is difficult to predict when stores can be safely reopened, or when customers would actually feel safe enough to shop.

A bankruptcy process during this type of widespread uncertainty, when it’s not clear what the future of the in-store retail business is, is fairly uncharted territory, experts said.

The bankruptcy proceedings themselves may also be complicated by a lack of visibility into revenues in the coming weeks and months. That uncertainty complicates the calculus not only for vendors, which may hesitate to continue shipping to a retailer unable to pay its bills during the bankruptcy, but is also likely to deter lenders uncertain of what returns they can expect from a transaction in the current climate.

See Neiman Marcus Group’s Top Creditors on the next page: