Neiman Marcus Group finally fell on Thursday — but is looking to get back on its feet quickly. 🔐
Crushed under $4.5 billion in debt from its latest private equity buyout, starved of revenues by the coronavirus shutdown and racing to connect with consumers in a more digital world, the luxury department store filed for Chapter 11 protection from creditors in the U.S. Bankruptcy Court for the Southern District of Texas.
Now the company is at least on the path toward getting a fresh start, having received money from lenders to tide it over during the bankruptcy. The plan is to finish pushing Neiman’s 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 lenders.
That brings TPG back into the picture at Neiman’s, which seems like some luxury jewel that private equity players and big-money investors can’t quite help but covet. J.C. Penney Co. Inc. — which never quite recovered from the failed reinvention that came after Pershing Square Capital Management started pushing for change and Ron Johnson was brought in as ceo — is seen as next in line and is expected to file next week, although the company is still said to be exploring its options.
Now that the deed is done, Neiman’s can focus more squarely on the future — not that the road will be easy. For vendors, the key question is whether Neiman’s will be able to pay its bills during the bankruptcy, and what sort of assumptions the retailer is making about its ability to reopen and just how many stores it plans to keep.
The brand plans to continue to deliver to the retailer. “We’re working on the assortment right now, just waiting for final plans,” Badgley said. “No one knows with any clarity when the businesses can reopen, and…under what circumstances can they open, and how will the customer feel about shopping from a health point of view or a financial point of view,” he said.
Ultimately, the company went into bankruptcy with a plan for a quick exit and the way its restructuring plan was put together shows how it worked with its secured lenders to make it happen. Secured creditors are theoretically entitled to full repayment of their debts, but if there isn’t enough to go around, creditors lower down the totem pole could expect losses.
The company’s filings also indicate some plans for its future viability and the strength of its e-commerce business, saying that roughly a third of its annual revenue comes from online sales. “That’s the beauty of filing a pre-negotiated plan — you’ve laid out the groundwork…and it’s not that hard to figure out where the company is going to land as soon as it exits bankruptcy,” he said.
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