What You Need to Know About Neiman Marcus’ Bankruptcy
The Neiman Marcus Group is only one of the many major retailers that are being severely affected. The coronavirus pandemic impacted the growing number of brands that have filed for Bankruptcy.
The coronavirus pandemic and its large debt load have severely affected the retailer aged 113 years old.
Before the outbreak, there was speculation that the company might be behind Neiman Marcus, Bergdorf Goodman, Mytheresa, Horchow and Last Call, which was the next retailer to file bankruptcy because of its long-term debt of $4 billion. COVID-19 has caused additional problems for the retailer as stores have closed stores since March.
The retailer, which is 113 years old, follows several fashion brands that succumbed to the pressures from the pandemic and filed bankruptcy in the past few months, J.C. Penney, J. Crew, Centric Brands and True Religion, among others.
WWD provides details about Neiman Marcus’ bankruptcy. This includes the factors that led to it and potential buyers.
Neiman Marcus has filed for bankruptcy?
The Neiman Marcus Group for Chapter 11 bankruptcy protection, filed May 7, at the U.S. Bankruptcy Court, Southern District of Texas.
The company secured $675 million in debtors-in-possession financing, and it reached a restructuring support agreement (with most of its lenders)
Are Neiman Marcus’ stores closing?
In response to the COVID-19 pandemic, the Neiman Marcus Group temporarily shut down its 43 Neiman Marc and two Bergdorf Goodman locations nationwide. This was following the Centers for Disease Control and Prevention guidelines. Since then, 31 stores have been reopened for customer traffic.
Court documents show that the retailer will close four Neiman Marcus stores. It includes its Hudson Yards location, which is 188,000 feet squared, and its Bellevue and Palm Beach, Fla. locations. It also closed 17 of its 22 Last Call outlets.
Sources suggest that Neiman Marcus could also close its doors in Dallas and St. Louis. Westchester, N.Y.
The company laid off approximately 11,282 employees in March and April. These workers are being brought back gradually as the retailer reopens its stores.
The retailerSales momentum regainedIt generated $185,435,500 sales in June, compared with $141,127,000 in May. In June, net losses were $56,512,000, compared with $74,728,000 for May.
In the interview with WWD, Geoffroy van Raemdonck, chief executive officer of Neiman Marcus Group, stated that the layoffs and closures were not a reduction in the workforce or a reaction to any economic events now but a strategic move to redeploy existing resources.
Two distribution centers, Longview and Las Colinas in Texas, will be closed by the company.
These changes are part of van Raemdonck’s four-year plan, initiated in August 2018, to transform the Neiman Marc Group into a “preeminent luxurious customer platform.” The company will allocate more resources for its Neiman Marcus division and Bergdorf Goodman divisions.
What factors led to Neiman Marcus’ Bankruptcy?
Due to the temporary closures of stores across the country, COVID-19 has caused significant disruptions in company operations. About one-third of the company’s 13,700 employees were furloughed. These closures resulted in the closing of many stores. In addition to the e-commerce websites MyTheresa, Last Call, and Horchow, these stores generate $5 billion annually in volume.
Neiman Marcus Group is a long-term lender with $4 billion.Annual interest expenses of approximately $300 millionThis is causing a decline in profitability and leading to losses. It intends to get rid of its debt in bankruptcy.
The company is also in default of large interest payments on bonds due on April 15, leading to a bankruptcy filing. Neiman’s offered a grace period of five days on $72.9million in interest payments due in 2024 and 30 days for $5.7million in interest due in 2021.
Neiman Marcus also has the Boston Consulting Group as a consultant for restructurings.
What does it mean for Neiman Marcus to file for bankruptcy?
Companies generally, as a last resort, file bankruptcy. After overextending their credit lines, they are unable to service their debts or make lease payments. Companies can file to allow them to continue their operations and create a plan for handling debt.
All creditor enforcement actions against the bankruptcy filing are halted. This means that landlords can’t evict them from stores, and mortgage lenders can’t enact foreclosure. Creditors cannot also take the collateral and goods of the retailer.
Chapter 11 restructuring can also wipe out equity and debt, create new owners, and allow the company to close down its stores that are not performing while it is still in operation.
What can Neiman Marcus do after it files for bankruptcy?
The company has several options after filing for bankruptcy. You could sell certain parts of the business, like its MyTheresa luxury online e-commerce site and Bergdorf Goodman. Working with debtors to get a loan forgiveness level or extension of payments is another option.
Sources suggest three more options. The company might be interested in: whether the lender operates the business or if the business is sold to a single party or liquidated.
However, liquidation is unlikely, considering that the COVID-19 pandemic has forced stores to remain closed for the near future.
Are there any potential buyers for the Neiman Marcus group?
According to reports, Hudson’s Bay Co.’s chief executive officer Richard Baker, Neiman Marcus Group, has been a long-time interest in its acquisition, combined with Saks Fifth Avenue, to create a North American luxury retailer. Hudson’s Bay Company went private this year.
What’s the most recent development in Neiman Marcus Group bankruptcy proceedings?
The retailer received approval for its debtor-in-possession financing package of $675 million on June 16. The package included $275 million already available to the retailer at the beginning of bankruptcy proceedings. The DIP funding will allow the retailer to reopen its stores during the ongoing pandemic.
Neiman Marcus hopes to have a reorganization plan approved by September.
What’s the deal with Mytheresa?
There have been many developments throughout the proceedings dispute between the retailer’s creditors and Neiman Marcus over Neiman Marcus handling of its Mytheresa website in 2018.
Neiman’s creditors are the least likely to be repaid in bankruptcy. They oppose the idea for a reorganisation program because it would exempt the retailer’s leveraged buyers sponsors, Ares Management Corp., and Canada Pension Plan Investment Board, from liability for claims relating to the Mytheresa transactions. Assets would therefore be protected from creditors.
In their restructuring proposal, the unsecured creditors’ committee asks the court for permission to sue Neiman’s sponsors for recoveries relating to the Mytheresa Transfer.
Neiman Marcus, a tentative agreement was reached on Mytheresa on July 30, $10 million will be given to a recovery pool for general unsecured claims.
The retailer’s buyout sponsors will also transfer 140 million shares of preferred stock series B from Mytheresa, to its unsecured creditors. This will allow them to surrender a portion of the business.
How does it work if there is a pandemic?
The COVID-19 pandemic had one impact on bankruptcy proceedings: the Neiman Marcus Group could not liquidate the business while the stores were temporarily closed.
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