Pedestrians cross Tenth Avenue near Neiman Marcus the retail store before the Hudson Yards Grand Opening Ceremony at Hudson Yards in New York, New York, USA, 15 March 2019. Hudson Yards is a real estate development on Manhattan's westside in the neighborhood of Chelsea, which will feature both residential and commercial space along with retail shopping, fine dining, a ten screen movie theater, a public school, and artist exhibition space.Grand Opening Hudson Yards New York, USA - 15 Mar 2019

The debt-consumed Neiman Marcus Group and its lenders are thrashing out scenarios for how the company could emerge from under bankruptcy protection.

According to sources, a bankruptcy filing is imminent, and that could lead to either the lenders taking over the company and continuing to operate it in a greatly pared-down state; a strategic buyer, such as the Hudson’s Bay Co., purchasing the business through a court-supervised auction, or thirdly, a liquidation.

Lenders are involved in providing debtor-in-possession financing and would seek an outcome that they perceive provides the best recovery for them, in the short term or long term.

By some estimates, a dismantling of the Neiman Marcus Group and inventory liquidation could garner about $1.2 billion for creditors, not a great sum considering the company has $4.6 billion in debt and generates $5 billion in annual volume. Financial sources arrive at that figure by assuming Bergdorf Goodman carries a price tag of around $450 million and gets sold off as an ongoing business. Bergdorf Goodman, one of the most luxurious emporiums in the world, could be split from the group and certain overseas retailers and investment firms have shown some interest in the past. However, Neiman Marcus Group does not own Bergdorf Goodman’s real estate, which is still owned by the Goodman family, which partially explains its lower price tag.

Sources also estimate that a liquidation of Neiman Marcus inventory would generate roughly $350 million, and real estate, intellectual property and other Neiman Marcus Group assets could be sold off for about $400 million. Neiman Marcus owns very little of its real estate.

Mytheresa, the successful luxury website based in Germany, is an asset that continues to be in question. From the perspective of the company’s owners and Mytheresa itself, a Chapter 11 filing would not impact Mytheresa because it is legally, financially and operationally independent from NMG. Neiman Marcus Group purchased Mytheresa in 2014 and transferred it into a separate entity, which creditors argued was a “fraudulent conveyance” illegally shielding the asset from the reach of creditors in the event of a bankruptcy.

As reported, the owners were considering alternatives for Mytheresa, including an initial public offering or some other type of sale. But those plans have been dropped due to the coronavirus and with Neiman Marcus Group now focused on figuring out how it restructures for the future. Neiman’s also has a small stake in Fashionphile.

One source said Tuesday there was 50-50 chance that the Baker-led HBC will buy Neiman’s out of bankruptcy. It’s believed that one of Neiman’s owners, Ares Management, which purchased Neiman’s in 2013 for $6 billion along with the Canada Pension Plan Investment Board, is interested in retaining a stake in the retailer.

The sources also indicated that a new owner of Neiman Marcus Group could decide to close around half of the 38 Neiman Marcus department stores currently operating, which seems drastic, though amid the pandemic, every retailer is taking a closer look at the type of store fleet they want to operate going forward.

“There are a lot of us in the luxury sector that believe now that we could operate a lot more profitability with far fewer stores. Neiman’s could be better off operating as a little jewel,” and less like a national chain, one source said.

Generally, Neiman’s stores are highly productive, particularly in Northpark, Dallas; Beverly Hills, and Bal Harbour and Palm Beach, Fla., among other locations. Yet several locations are said to be underperforming the chain and could be closed, including those in Natick, Mass., and the downtown Dallas store, the longtime flagship. There are also questions on how Neiman’s is performing in Hudson Yards on the West Side of Manhattan. Neiman’s executives have said it has been on or above plan, pre-pandemic, though outside sources said the 188,000-square-foot unit has been carried by its Chanel and Louis Vuitton shops and its upscale food and drink offerings, including the Bar Stanley bar and restaurant, the Zodiac Room restaurant and the epicure area.

Read more from WWD: 

What to Know About Neiman Marcus’ Potential Bankruptcy

Britain’s High Streets in Peril as COVID-19 Ravages Physical Retail

Retail’s Turbulence and Outlook for Survival

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