Neiman Marcus Group is rallying support for its plan to push back the due date on its massive debt load.
If successful, chief executive officer Geoffroy van Raemdonck will get three years of breathing room as he tries to grow the luxury retailer, matching its operations with its balance sheet, which carries $4.6 billion in debt.
Neiman’s on Monday said it had reached a transaction support agreement with lenders holding 57 percent of its term loan and 61 percent of its unsecured notes.
Under terms of the deal, the term loan maturity would be pushed back to October 2023 and the unsecured notes could come due in April 2024.
The plan would include sweeteners for both types of lenders.
Term loan holders’ package includes a $550 million pay down at par and collateral that includes a first lien or first priority interest in about $1.8 billion of the retailer’s unencumbered real estate. And noteholders would get an exchange offer, which includes $250 million of 10 percent non-voting preferred equity of a U.S. holding company tied to NMG Germany, holding the Mytheresa business, and other adjustments.
Neiman’s said the exchange offer would commence next month and the transaction is projected to close in late May.
The retailer is owned by Ares Management and Canada Pension Plan Investment Board and has come under scrutiny for moving Mytheresa into a holding company that removes it from the reach of debt holders.
Under the deal, Mytheresa will remain separate from the rest of the company, but will be subject to certain covenants.
Van Raemdonck said: “This transaction provides substantial value to our lenders and creates ample runway to execute on and complete Neiman Marcus Group’s transformation plan into a luxury customer platform. The commitments we have obtained for this transaction are a validation of our business and transformation strategy and our leadership team. We are appreciative of our lenders for their support and for the confidence they have put in our long-term success.”
A summary of the transaction provided by Neiman’s noted that it, “Removes all funded debt maturities before 2023, along NMG to execute on its ‘Ignite to Win’ growth strategy, designed to drive NMG to $5 billion-plus in sales and $700 million-plus in adjusted EBITDA within five years.”
The agreement requires that investors holding at least 95 percent of the term loan and as well as 95 percent of the notes buy in, although the retailer said, “these thresholds may be lowered by the company at its sole discretion.”
Investor Marble Ridge — which sued Neiman’s alleging “fraudulent transfer” of the Mytheresa assets only to see that suit dismissed because it didn’t have standing to bring the case — expressed its concerns about the retailer’s financial position again on Monday.
“This proposed transaction by Neiman Marcus, if consummated, will not only result in the stripping of several hundred million dollars of value for the benefit of the out-of-money sponsors, but also substantially increase interest expense for an already over-levered company,” the investor said. “Accordingly, Marble Ridge is pursuing the appropriate courses of action to protect its interests against the potential serious impairment all stakeholders face as a result of Neiman Marcus’ proposed transaction.”