Neiman Marcus Reportedly Defaults on Loan Payment — Now What?

The heavily indebted Neiman Marcus is in an even more precarious position after reportedly skipping out on a bond payment due this week.

According to Reuters, the beleaguered department store 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.)

Over the past few weeks, the Plano, Texas-based company has been rumored to be exploring a bankruptcy filing as the coronavirus outbreak continues to keep its doors shuttered and stifle sales.

An exclusive report from Reuters early this month revealed that the luxury chain was in discussions with bondholders about potential financing to help maintain its operations while under bankruptcy protection. Sources who spoke with the news outlet suggested that Neiman Marcus was “several weeks away” from going bankrupt — but added that creditors could extend the time for the company to make its debt payments due this month as restructuring talks are underway.

Reports indicating that Neiman Marcus was mulling Chapter 11 protection go back to mid-March, 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.

Neiman Marcus did not respond to FN’s request for comment for this story.

Amid digital disruption and reduced foot traffic, Neiman Marcus has faced numerous struggles 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.

However, Neiman Marcus has a massive debt load of more than $4 billion, much of which dates to its 2013 private equity buyout. It has looked into strategies for raising capital, including the potential sale or IPO of its MyTheresa e-commerce site.

Last year, the chain was able to rework its debt and avoid filing for bankruptcy, but the escalating coronavirus pandemic forced the company to shutter its Neiman Marcus, Last Call and Bergdorf Goodman banners over the past few weeks. A “large portion” of its workforce was either furloughed or saw their pay reduced. CEO Geoffroy van Raemdonck has forfeited his salary, while executives reporting directly to him waived a “significant amount” of their own base pay.

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