Neiman Marcus to file for bankruptcy as soon as this week

Neiman Marcus Group is a Dallas-based department-store chain that was acquired by Ares Management LLC (ARES) and the Canada Pension Plan Investment Board in 2013.

It was reported by Reuters on Sunday that the Neiman Marcus Group is getting set to file for bankruptcy any time within this week. As of last week, it was reported that the department-store chain had nearly $5 billion in debt, according to the credit ratings of the Standard & Poor. Part of the company’s debt is the legacy of its $6 billion buyout in 2013 by its owners.

In a note last week, a Standard’s and Poor’s analyst wrote that “In the light of significant headswings stemming from the coronavirus pandemic and our expectation for a US recession this year, we believe the company’s prospects for a turnaround are increasingly low.” Also stating that “we continue to view its capital structure as unstainable.”

Due to the pandemic, Neiman Marcus has forcefully closed all its stores and furlough nearly 14,000 of its employees. Reports have been made claiming that the company plans to secure a loan in hundreds of millions of dollars to keep some of its units operational while it proceeds with the bankruptcy protection filing. As first reported by Reuters, the company is in the final stages of negotiating the loan.

Neiman Marcus has been charged with three options: to sell the business, shrink the business by half of its stores and keep operating, or opt for total liquidation. Prior to the coronavirus pandemic, the company had been struggling financially for years and has only been recently pushed to the brink by the pandemic.

The company had tried by all means to avoid filing for bankruptcy over the years of its financial struggles, however, the current economic situation leaves it with no choice but to file for bankruptcy.

It has since become the first obvious major US department store to fall as a result of the current rough economic times. Other department stores are closing up their stores and trying by all means not to end up like Neiman Marcus. An example is seen with Macy’s and Nordstorm Inc., as they rush to secure new financing. JC Penny Co is also on the brink of filing bankruptcy in order to work on its declining finances and be protected against debt payments.

Hopefully, filing for bankruptcy would attract the interest of potential investors seeking to acquire the company or some of its assets at a cheap rate. In 2017. Hudson’s Bay Co made a bid for Neiman Marcus but didn’t pursue it. This may be a good opportunity to once again place a bid for the company and pursue it this time around.

Neiman Marcus is a private company, the company was taken private in October 2005.

Today, Neiman Marcus announced that it has secured $675 million in financing from its creditors to fund operations through bankruptcy. “Like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business,” CEO Geoffroy van Raemdonck said in a statement. “The binding agreement from our creditors gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation. We will emerge a far stronger company.”