Neiman Marcus in The Shops at Hudson Yards is close to declaring bankruptcy due to the effects of the COVID-19 pandemic forcing closures across America, New York, NY May 1, 2020. (Anthony Behar/Sipa USA)(Sipa via AP Images)

Neiman Marcus is set to emerge from bankruptcy this month after a whirlwind reorganization that started in May. 

On Friday afternoon, a Texas bankruptcy court approved the luxury retailer’s restructuring plan that would convert some $4 billion in debt to equity, out of its $5.5 billion in funded debt. With the restructuring confirmed, the retailer said it plans to formally emerge from bankruptcy in roughly two weeks. 

“This is an important milestone in our Chapter 11 process and an exciting day for the future of our company, as it sets the stage for our emergence,” the retailer’s chief executive officer Geoffroy van Raemdonck said in a statement Friday.

“Throughout this process, I’ve been so impressed by the commitment of our associates, who continue to extend passion and love for our customers,” he said. “I’m also grateful to our brand partners for standing with us and believing in our business. I remain inspired by the opportunity to continue to surprise and delight our customers online, in-store, and at home as we continue on our journey to become the preeminent luxury platform.”

The reorganization would effectively hand over control of the retail business to the retailer’s first lien lenders, from Ares Management and investment fund Canada Pension Plan Investment Board, which had taken over the retailer in a $6 billion leveraged buyout in 2013. 

U.S. bankruptcy judge David Jones acknowledged the swift resolution in the case, in light of the circumstances of the COVID-19 pandemic, as well as the dispute over the retailer’s contentious transfer of the assets of its German luxury web site Mytheresa, as part of a debt-restructuring effort in 2018.

The Mytheresa dispute, and its eventual resolution in July, had led to a collateral series of events that culminated in the arrest Thursday of Dan Kamensky, founder of the now-shuttering hedge fund Marble Ridge, which had been a vocal critic of the Mytheresa transaction through the case.

“There have been an awful lot of distractions in this case,” Judge Jones said at Friday’s hearing. “But I compliment you all on keeping your eyes on the end.”

“Retail cases never succeed if the cases string out over time, and it’s hard for retail cases to succeed anyway,” he added. “The fact that we’re here today is a tribute to all of your efforts, all of your skill sets, all of your talents.”

As part of the Mytheresa settlement, which is part of the retailer’s reorganization plan, the Neiman Marcus Group Inc. parent entity controlled by Ares and CPPIB, and which itself wasn’t part of the bankruptcy, agreed to allocate 140 million shares of Series B preferred stock in Mytheresa to a general unsecured creditors’ trust. In addition, the Neiman’s bankruptcy estate also agreed to put in $10 million for general unsecured creditors. 

The plan’s confirmation will allow the company to formally emerge from bankruptcy this month and keep the company in business during an extraordinary time, Matthew Fagen, partner at Kirkland & Ellis LLP, told the court. 

“What we’ve seen over the past four months, and are here to present to you today, is a swift and efficient restructuring,” Fagen said. “It’s going to result in a better capitalized company, it’s supported by the creditors, and it will leave Neiman Marcus poised for success as the leader in luxury retail worldwide.”

Neiman’s restructuring plan, and the Mytheresa settlement also provide for a feature called a “convenience treatment,” which would provide a fixed amount of certain recoveries for general unsecured claims of less than $50,000, according to the company.

There’s also a $750 million exit facility under the restructuring plan, which provides the retailer with a cash runway as it emerges from bankruptcy. In addition, a committed $900 million exit asset-based loan facility will help Neiman’s pay down its previous ABL claims.

Kamensky’s alleged conduct in the case had involved efforts to pressure Jefferies Financial Group not to bid on the shares of Series B preferred stock in Mytheresa that would be allocated as part of the settlement, according to a report in August by the U.S. trustee in the bankruptcy case. 

At Friday’s hearing, Judge Jones also thanked the Jefferies employees who participated in the inquiry that led to the U.S. Trustee’s findings about Kamensky’s conduct.

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