Neiman Marcus Group is the second major retailer this week and first department store chain to file for bankruptcy during the coronavirus pandemic.
Earlier this week, J.Crew Group, which operates the J.Crew and Madewell brands, filed for bankruptcy protection. Now Neiman Marcus Group followed suit with an agreement that will eliminate about $4 billion of its debt and make its creditors the majority owners of its business.
While no plans for store closures were announced, the retailer said it will continue to assess store closure decisions and will reopen stores as it is safe to do so based on the status of the pandemic. Additionally, it announced temporary closures of some Neiman Marcus, Bergdorf Goodman, and Last Call stores have been extended through May 31 to protect the health and safety of customers and associates.
“The Chapter 11 process will not impact the timing of store re-openings,” it noted in a press release.
A total of 10 stores nationwide are now open for curbside pickup – all Texas Neiman Marcus stores, as well as Tampa, Las Vegas and Tysons Corner stores – and the Atlanta and NorthPark Neiman Marcus stores became available to customers by private appointment.
“Among all legacy retailers, Neiman Marcus possibly stood to lose the most once the COVID-19 crisis broke out,” Kelly Lynch, retail solutions manager, ActiveViam, tells RIS. “Plagued by a heavy debt load and increased competition from other e-commerce players within the luxury space, Neiman Marcus’s struggles have long been documented. However, given the brand still carries significant cache within the luxury space in particular, it will be interesting to see how the company emerges on the other side of this crisis.”
Neiman Marcus said it has secured $675 million in financing from its creditors to enable business operations through bankruptcy. The creditors have also committed to fulfill a $750 million exit financing package that would fully refinance the DIP financing and provide additional liquidity for the business.
The company expects to emerge from the process in early Fall 2020. Upon emergence, the company’s planned capital structure is anticipated to be long dated with no near-term maturities and to eliminate approximately $4 billion of its existing debt.
“Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth,” Geoffroy van Raemdonck, chairman and CEO of Neiman Marcus Group said. “We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omnichannel 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.”
Kirkland & Ellis LLP is serving as legal counsel to the company, Lazard Ltd. is serving as the company’s investment banker, and Berkeley Research Group is serving as the company’s financial advisor.
The Extended Term Loan Lenders are represented by Wachtell, Lipton, Rosen & Katz as legal counsel and Ducera Partners LLC as investment banker. The Noteholders are represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP as legal counsel and Houlihan Lokey as investment banker.