Luxury retailer Neiman Marcus Group filed for Chapter 11 bankruptcy this morning in Texas as part of a restructuring agreement with its creditors to remove some $4 billion in debt from its balance sheet, the company announced.
The department store chain said it plans to emerge from bankruptcy protection in the fall.
The company said it secured $675 million in debtor-in-possession (DIP) financing from its largest creditors, who in turn will become majority shareholders. That group of creditors includes Pacific Investment Management Co. (PIMCO), TPG and Davidson Kempner Capital Management, according to sources familiar with the situation. The DIP financing plan is pending court approval.
Neiman Marcus also secured $750 million of exit financing from those creditors, which would refinance the DIP. The infusion of capital is expected to support its operations during the Covid-19 pandemic and beyond.
The plan was agreed to by holders of two-thirds of the company’s outstanding debt, as well as its shareholders, which include private equity firms Ares Management and Canada Pension Plan Investment Board, according to the announcement.
The department store chain noted that ecommerce retailer Mytheresa, which was separated from the company, is not part of the Chapter 11 process and would continue to operate independently.
“Prior to Covid-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth,” said Geoffroy van Raemdonck, the company’s CEO, in a statement. “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.”
Van Raemdonck also said that like many businesses right now, Neiman Marcus is “facing unprecedented disruption caused by the Covid-19 pandemic, which has placed inexorable pressure” on the company.
Sources confirmed to Adweek earlier this week that the retailer would be filing for bankruptcy protection in the coming days. According to credit rating agency Moody’s, Neiman Marcus had some $4.3 billion in debt. That debt was the result of a leveraged buyout by Ares and CPPIB for $6 billion in 2013 from private equity firms TPG and Warburg Pincus.
Neiman Marcus, which was pegged as having a high probability of default, successfully extended the maturity date on its term loan last year, along with issuing new debt and completing an exchange offer for its senior unsecured notes, which was to give the retailer more time to turn around the business, according to Moody’s. But the pandemic upended those plans.
Neiman Marcus is the fourth retailer to file for Chapter 11 this week following J.Crew Group, J. Hilburn and John Varvatos, with more likely to file as a result of the pandemic.
Meanwhile, the luxury group said temporary store closures of some Neiman Marcus, Bergdorf Goodman and Last Call stores would be extended through May 31 to protect the health of its employees and customers.
Curbside pickup is available at 10 locations, including all Texas Neiman Marcus stores, as well as Tampa, Las Vegas and Tysons Corner stores. On May 4, the Atlanta and NorthPark Neiman Marcus stores became available to customers by private appointment.
Editor’s note: This article was updated to reflect that the largest creditors include PIMCO, TPG and Davidson Kempner and that retailers John Varvatos and J. Hilburn also filed for bankruptcy this past week.