Neiman Marcus Group Ltd. to Issue Notes

Luxe retailer goes to market with $1.56 billion in bonds to fund buyout.

Neiman Marcus Group said it plans to sell $1.56 billion in bonds to help pay for its $6 billion buyout by Ares Management and the Canada Pension Plan Investment Board.

This story first appeared in the October 9, 2013 issue of WWD.  Subscribe Today.

Subject to market conditions, the company said it plans to “launch a private placement of $960 million principal amount senior cash pay notes due 2021 and $600 million senior [payment-in-kind] toggle notes due 2021.” The toggle notes allow Neiman’s to make payments on that debt in either cash or additional notes.

Neiman’s also plans to take on a $2.95 billion term loan to fund the deal.

All together, the buyout is expected to boost Neiman’s debt to $4.6 billion from $2.7 billion. Ares and the pension fund plan to cover a quarter of the purchase price themselves.

The retailer is also taking on an $800 million senior secured asset-based revolving credit facility, which will help it maintain its liquidity.

On Monday, Moody’s Investors Service cut its corporate family rating on the retailer to “B3” from “B2” and said a “sizable amount” of Neiman’s “free cash flow will be used to fund a mandatory cash-flow sweep to repay its term loan.”

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