Neiman Marcus Group Inc. was hit with a lawsuit in New York by UMB Bank that accused the private equity firm that controls the company of trying to elude creditors by changing the corporate structure of the retailer’s “crown jewel” asset, the online retailer MyTheresa.
According to the suit, the trustee for certain debt Neiman’s has issued, Ares Partners moved the MyTheresa subsidiaries in 2018 to another entity, even though the online shopping retailer was essentially serving as an asset that backed the Neiman’s debts. The MyTheresa subsidiaries were valued at roughly $1 billion, according to a valuation in March by Goldman Sachs.
The debts come from the effort to fund the retailer’s 2013 leveraged buyout by Ares and the Canada Pension Plan Investment Board, according to the suit, which was filed in state court in New York.
“There was no business purpose for the unlawful transfers: their intended result was to place MyTheresa into entities beyond the reach of the company’s creditors, including holders of the unsecured notes, to hinder and delay creditor recovery,” UMB said in the suit.
This isn’t the first time Neiman’s has been sued over this controversial transfer of MyTheresa assets. Marble Ridge Capital claimed in a lawsuit in Texas state court that the move was a ploy to put a valuable asset out of the reach of creditors. But the judge there dismissed the case in March, saying the court didn’t have jurisdiction.
A Neiman’s spokeswoman said on Friday: “These allegations are meritless. It’s disappointing that these debt holders chose to assert claims through the trustee that are nearly identical to those already dismissed by a Texas court with prejudice, rather than join the overwhelmingly successful exchange offer that the company achieved with the majority of its debt holders. As has been demonstrated time and again, the exchange and MyTheresa transactions fully complied with the company’s debt documents. The company intends to vigorously defend itself.” A representative for Ares did not immediately comment on Friday.
In 2014, Neiman’s acquired MyTheresa, an international online business that helped broaden the offerings of the U.S.-based and brick-and-mortar-focused company. But Neiman’s continued to have financial difficulty in subsequent years.
“Unbeknownst to the market in general, let alone to the company’s creditors, [the retailer] and Ares were planning and beginning to implement transactions designed to strip value from the company for their own benefit, despite the company’s dire situation, all at the creditors’ expense,” UMB said in the complaint.
“The heart of this strategy was seizing MyTheresa, the crown-jewel asset from the company’s portfolio,” it said.