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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.

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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