Neiman Marcus Starts talks to restructure debt and avert bankruptcy

By Soma Biswas, Special Writer, The Wall Street Journal

Luxury retailer has looming maturities on most of its USD 4.7 billion of debt

Neiman Marcus Group Ltd., the Dallas-based luxury department-store chain, started talks in recent weeks with a group of creditors that could lead to a debt restructuring that will push out looming debt maturities and avert a bankruptcy filing, people familiar with the matter said.

The company began talks with a group of bondholders and lenders represented by the law firm Paul Weiss Rifkind Wharton & Garrison and financial advisers Houlihan Lokey that could lead to a restructuring of Neiman’s USD 4.7 billion in debt, according to people familiar with the matter.

Almost all of the debt comes due in 2020 and 2021. The company’s goal in the talks is to extend the debt maturities and possibly reduce the overall amount of debt without a bankruptcy filing, the people said.

The luxury department-store chain is being advised in the talks by Lazard Ltd. , Moelis & Co. and the law firms Kirkland & Ellis LLP and Proskauer Rose LLP, people familiar with the matter said.

Creditors involved in the talks include Oaktree Capital Management and the Capital Group, according to a person familiar with the matter. Oaktree and Capital Group declined to comment.

While there is no certainty that Neiman Marcus could pay or refinance the debt in 2020 and 2021, the company has seen its results improve recently. The company reported a 2.3% increase in same-store sales for the quarter ended in July, but still posted a USD 75.3 million net loss for the period on total revenue of USD 1.13 billion.

Neiman Marcus’s debt load is the result of two subsequent buyouts by private-equity firms. The latest deal was struck in 2013, when Ares Management LLC and the Canada Pension Plan Investment Board acquired the company for USD 6 billion.

Bondholders believe the retailer and its private-equity owners will use Neiman’s valuable MyTheresa online business as a bargaining chip in negotiations with creditors.

MyTheresa, which targets younger customers in Europe, Asia and the Middle East, has USD 360 million in annual sales and is thought to be worth hundreds of millions of dollars, according to bondholders who aren’t authorized to speak publicly. Total revenue for Neiman Marcus in the recently ended fiscal year was USD 4.9 billion.

Neiman Marcus recently transferred shares of MyTheresa to its parent holding company, which weakened bondholders’ potential claims to the subsidiary. One bondholder, Marble Ridge Capital LP, alleged in publicly released letters to the company’s board that the MyTheresa transfer violated debt agreements. Neiman Marcus maintains that the transfer was allowed.

Marble Ridge has urged the company to sell MyTheresa and use the proceeds to pay down debt. Marble Ridge has retained its own counsel, Brown Rudnick LLP, on the matter.

Ares Management and CPPIB did not respond to requests for comment.