In a complaint filed in the case late Wednesday in Texas bankruptcy court, the retailer accused the hedge fund of pressuring a potential competitor from bidding in a key transaction part of the reorganization process. The retailer alleged that Marble Ridge’s conduct was a violation of its role, at the time, on the official creditors committee in the case.
The allegations in Neiman’s complaint track with findings earlier this month by the U.S. trustee in the case, who wrote that Marble Ridge managing partner and principal Dan Kamensky had tried to block the financial firm Jefferies Financial Group Inc. from bidding on shares of series B preferred stock in Mytheresa, the German luxury web site that Neiman’s had acquired in 2014.
“The United States Trustee uncovered dramatic wrongdoing even with limited time and document productions,” Neiman’s wrote in its complaint Wednesday. “The integrity of the process now demands that a full adversarial proceeding be prosecuted given the severity of Marble Ridge’s actions.”
Marble Ridge, which stepped down from the creditors’ committee as of August, is also in the process of winding down, a representative for the hedge fund confirmed this month. Neiman’s complaint sought a temporary restraining order to require Marble Ridge to set aside some $55 million to pay for potential damages and penalties for its conduct in the Neiman’s bankruptcy. The retailer argued that it wanted to ensure that Marble Ridge doesn’t distribute the proceeds during its own wind-down process without leaving enough funds to pay those potential damages to Neiman’s.
In a hearing Thursday evening, attorneys for Marble Ridge told the court they will agree to temporarily set aside the $55 million Neiman’s was seeking in the event the retailer prevails in the case.
But a representative for Marble Ridge said in a statement Thursday that the company plans to fight Neiman’s allegations.
“Marble Ridge believes this action is meritless and will vigorously oppose the relief sought in the complaint,” the representative said. “Marble Ridge looks forward to presenting the facts to the court.”
The parties will convene again at a hearing in mid-September to discuss Neiman’s request for a preliminary injunction against Marble Ridge to secure the potential damages.
At the hearing Thursday, U.S. bankruptcy judge David Jones, who is overseeing the case, underscored the seriousness of the allegations against the firm, and alluded to the possibility that Kamensky may face criminal charges for his conduct in the case.
“I have an assault on a process that I took an oath to protect,” Judge Jones said. “Based upon what is of record at present, I have more than a colorable case that there have been intentional violations of applicable civil and criminal laws that govern bankruptcy proceedings.”
The U.S. trustee’s report had laid out a contentious series of events, backed by chat transcripts and recordings of phone calls that show Kamensky asking a Jefferies employee to get the firm to back off from bidding in the transaction. The captured conversations between Kamensky and the employee also appear to show Kamensky later acknowledging the seriousness of those actions, while also arguing it had been a misunderstanding. The trustee’s report indicated that Jefferies ultimately submitted a bid for the assets after all.
Jefferies had contemplated a 30-cent-per-share cash-out offer for the Mytheresa shares. Marble Ridge had itself indicated an offer that included backing the purchase of 60 million of those shares at 20 cents per share, according to previous court filings.
Marble Ridge said Thursday it “remains willing and able to discuss its currently pending offer to purchase the Mytheresa shares and is willing to participate in an open and transparent auction,” according to its statement.
Neiman’s complaint also took issue with Marble Ridge’s actions over the years, as the two companies battled over Neiman’s pre-bankruptcy transactions involving Mytheresa.
For years, creditors including Marble Ridge had alleged that Neiman’s leveraged buyout sponsors Ares Management Corp. and Canada Pension Plan Investment Board, which purchased the retailer for $6 billion in 2013, had moved the valuable Mytheresa asset from Neiman’s capital structure into another entity. Mytheresa isn’t part of the ongoing bankruptcy proceedings.
Marble Ridge had sued Neiman’s over the transfer, though that suit was later dismissed, but it also emerged as a vocal opponent during Neiman’s bankruptcy proceedings, challenging the actions of Ares and CPPIB, and demanding that unsecured creditors be allowed to pursue recoveries related to the Mytheresa transfer.
Ares and Neiman’s have disputed the allegations, and argued in court documents that Marble Ridge’s accusations were part of a “defamatory campaign.” Nonetheless, the Mytheresa transfer was the subject of concurrent inquiries during the bankruptcy by the creditors committee and a “disinterested manager” that Neiman Marcus Group LTD LLC had designated earlier this year to investigate the Mytheresa transfer. Those inquiries led to findings by both, the creditors committee and Neiman’s designated manager, that the retailer’s bankruptcy estates could try to recover value related to the Mytheresa transactions.
As part of proposed resolution last month to that dispute, meant to allow Neiman’s to complete its planned reorganization by September, Ares and CPPIB were to provide general unsecured creditors with the value of 140 million Mytheresa series B shares. It was those shares that Marble Ridge and Jefferies were seeking to bid on.
The U.S. trustee in the case, whose role is to ensure parties in the case adhere to bankruptcy rules, took on an inquiry into Marble Ridge’s conduct this month, after a complaint by the official creditors committee about Kamensky’s alleged conduct.
Marble Ridge has continued to argue that it was right to take issue with the Mytheresa transaction.
“Marble Ridge believes this attempt to discredit Marble Ridge and interfere with its operations by concocting damages is vindictive retaliation and motivated by Marble Ridge having previously exposed wrongdoing of Neiman Marcus and its equity sponsors over the past two years,” a representative for Marble Ridge said Thursday. “Marble Ridge’s efforts have now been validated in the Neiman bankruptcy proceedings by separate investigations conducted by the Official Committee of Unsecured Creditors and the Disinterested Manager appointed by Neiman Marcus to investigate the Sponsors’ misconduct.”
The Neiman’s reorganization plan confirmation hearing is scheduled in the case for Sept. 4.