Debt-saddled retailer Neiman Marcus could file for bankruptcy as soon as this week.
According to a Reuters report, the Dallas-based company is in the final stages of negotiating a loan worth hundreds of millions of dollars with its creditors. This cash would allow the retailer to keep some operations going while bankruptcy proceedings go on, the report said.
In an email to FN, Neiman Marcus declined to provide comment for this story.
Amid bankruptcy rumors dating back to mid-March, the company reportedly skipped out on a bond payment last week. According to Reuters, the department store chain received a letter from hedge fund Marble Ridge Capital LP, the bondholder it owes, which warned Neiman Marcus that it would take necessary actions to protect its rights. (The retailer’s reported decision not to pay the interest loan puts it in default with its creditors.)
Reports indicating that Neiman Marcus was mulling Chapter 11 protection began last month, when Bloomberg said that the retailer had begun engaging in preliminary talks with lenders about a bankruptcy loan to keep it going as a recovery plan is worked out.
“We are evaluating all courses of action to preserve our financial strength so that we may continue serving our customers and associates, and being a great partner to luxury brands globally,” a spokesperson told FN at the time.
Amid digital disruption and reduced foot traffic, Neiman Marcus has faced numerous struggles in recent years in its quest for profitability. In August 2018, it announced a four-year transformation plan that has entailed investing in omnichannel and supply chain technology, as well as embracing the growing resale trend through a minority stake in consignment company Fashionphile. Still, Neiman Marcus is strapped with a massive debt load of more than $4 billion, much of which dates to its 2013 private equity buyout.
It has looked into various strategies for raising capital, including the potential sale or IPO of its MyTheresa e-commerce site. But the escalating coronavirus pandemic has forced the company to shutter its Neiman Marcus, Last Call and Bergdorf Goodman banners over the past few weeks, hurting cash flow. Due to the pandemic, a “large portion” of the retailer’s workforce has either been furloughed or received a pay cut. CEO Geoffroy van Raemdonck has forfeited his salary, while executives reporting directly to him waived a “significant amount” of their base pay.
As it undergoes debt restructuring, Neiman Marcus revealed in March it would wind down its Last Call discount business, a perhaps surprising move since experts have considered off-price to be one of the retail sector’s few current bright spots. The department store chain said it would close the majority of its Last Call stores, leading to 750 slashed jobs. The company said the cuts did not represent a workforce reduction because Last Call workers may be transferred to other positions within the Neiman Marcus group, and those who are laid off will be eligible for severance and outplacement services.