Moody’s Investors Service and Standard & Poor’s are both reviewing their credit ratings on Neiman Marcus Group, anticipating that the firm’s $6 billion leveraged buyout will weigh it down with additional debt.
Neiman’s owners, TPG and Warburg Pincus, agreed to sell the firm to Ares Management and the Canadian Pension Plan Investment Board on Monday, eight years after buying the company.
Moody’s placed Neiman’s “B2” corporate family credit rating on review for downgrade. “Although the capital structure to finance the transaction has not yet been determined, Moody’s expects that the transaction will be largely financed with debt as is typical for most leveraged buyouts,” the debt watchdog said. “This will likely result in NMG’s credit metrics deteriorating to levels that are indicative of a lower rating.”
Moody’s noted that the company has a $2.6 billion bank credit facility that will be repaid when the deal closes, as well as $125 million in debt that will remain in place.
S&P put its “B-plus” rating of the company on credit watch and said, “We believe the company would add additional debt to its balance sheet because of the acquisition.”
As reported, Ares and CPPIB agreed to acquire Neiman’s for $6 billion on Monday. David Kaplan, senior partner and cohead of the private equity group at Ares, told WWD that there are plans to put more money into the retailer over the next five years.