On Tuesday, Neiman’s and Ares told the New York state court overseeing the suit to dismiss it, arguing that UMB Bank N.A., the trustee bringing the suit for the noteholders, simply isn’t eligible. The trustee was appointed under an agreement that gives it “limited rights” unless there is a default, which Neiman’s said is not the case here.
“Neiman Marcus has never missed a payment of principal or interest on any of its debt or violated any provision of the Indentures,” it argued in its filing.
“It is not unreasonable to require that Neiman Marcus miss a payment of principal or interest on the unsecured notes or otherwise trigger an event of default before the trustee can proceed with litigation that will impose serious burdens on the company,” it said.
UMB Bank had brought the suit in August, arguing that Neiman Marcus Group, Inc. and private equity company Ares plotted to secure their own interests amid the retailer’s declining financial picture since 2016. That year, the company’s sales sank, with its adjusted EBITDA falling 18 percent to roughly $585 million, according to the complaint.
In UMB Bank’s telling, the retailer’s declining revenues, coupled with an increased $4.7 billion debt load following its leveraged buyout in 2013 by Ares and the Canada Pension Plan Investment Board spurred an alleged tactic in 2018 to shift the ownership of MyTheresa, worth $1 billion according to an estimate by Goldman Sachs in March 2019.
Their alleged reason for doing this was to evade creditors of Neiman Marcus Group Ltd LLC, the entity that along with its affiliated issued $5 billion in debt, including the notes at issue, according to UMB Bank.
“Unbeknownst to the market in general, let alone to the company’s creditors, Neiman’s parent 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 Bank claimed in its complaint.
“The heart of this strategy was seizing MyTheresa, the crown-jewel asset from the company’s portfolio.”
Neiman’s and Ares first filed their motions to dismiss the suit in September, and followed up again this week to persuade the court to axe the complaint. When it previously responded in November, UMB Bank disagreed that it needed to wait until a default event to bring such a suit, arguing that the indenture agreement at issue allows “a majority of noteholders” to tell the trustee to do so.
The noteholders behind this suit are those who did not exchange their notes as part of a debt restructuring by Neiman’s after the MyTheresa transfer, UMB Bank has said.
On Tuesday, Neiman’s also stressed that it “vigorously contests” UMB Bank’s allegations about the alleged fraudulent transfer of MyTheresa and argued that the “MyTheresa transactions complied with the indentures and the law in all respects.”
Representatives for Neiman’s and Ares, and an attorney for UMB Bank did not comment on Wednesday.