The culmination of nearly five months of bankruptcy proceedings was expected after the luxury retailer’s plan of reorganization received the support of its creditors and new equity shareholders, and on Sept. 4 got the plan confirmed by the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division.
The plan, a debt for equity deal, enabled Neiman Marcus to eliminate more than $4 billion of debt and significant annual cash interest payments stemming from the debt, which most recently was more than $200 million, but in previous years exceeded $300 million. The company also said Friday it has no near-term maturities, which gives it breathing room to revive the business.
Emerging from bankruptcy, while a positive development, isn’t a guarantee of long-term survival. Sometimes retailers that have emerged from Chapter 11 find themselves back in bankruptcy court a few years later in a so-called Chapter 22.
Neiman’s challenges will be to streamline its store base and headcount; generate more foot traffic in its surviving stores amid the pandemic and convince shoppers it’s safe to return to the stores; sustain online sales growth, and maintain high levels of service, which Neiman’s is known for despite personnel cutbacks that are happening. About 10 stores are targeted for permanent closures, including the Neiman’s Manhattan flagship in Hudson Yards.
Neiman’s also must stay competitive to an increasingly aggressive Saks Fifth Avenue. Saks’ owner, Richard Baker, chairman and chief executive officer of Hudson’s Bay Co., has long wanted to take control of Neiman’s. Talks have been on and off for years.
On Wednesday this week, Neiman’s indicated that in light of reduced forecasts for its business, it is substantially reducing the number of selling and non-selling associates at both the Neiman Marcus and Bergdorf Goodman stores, as well as restaurant and bar staff at the stores, though many of the food and beverage workers are expected to be rehired as the restaurants and bars reopen. The number of employees being impacted was not disclosed. The company has about 12,000 employees.
Neiman’s told WWD it will be rolling out new positions, including service ambassadors, digital client advisers and personal stylists. The multichannel luxury retailer operates the Neiman Marcus, Bergdorf Goodman, Last Call and Horchow brands.
“While the unprecedented business disruption caused by COVID-19 has presented many challenges, it has also given us the opportunity to reimagine our platform and improve our business,” said Geoffroy van Raemdonck, ceo of Neiman Marcus Holding, who will continue to run the company. “We emerge from Chapter 11 as a stronger, more innovative retailer, brand partner, and employer.
“Our new owners, which include Pimco, Davidson Kempner Capital Management, and Sixth Street, understand the value of our brands and the opportunity for growth,” van Raemdonck said. “They are also strongly committed to supporting our company on sustainability issues.”
The owners are funding a $750 million exit financing package that refinances the debtor-in-possession loan and provides significant liquidity. The company has also secured a $125 million FILO (first-in, first-out) facility led by Pathlight, to refinance existing debt and also provide liquidity.
The exit term loan and FILO facility are in addition to the liquidity provided by the $900 million ABL, or asset-backed loan, led by Bank of America and a consortium of commercial banks.
Neiman’s former owners were Ares Management and the Canada Pension Plan Investment Board, which took over the luxury retailer in a $6 billion leveraged buyout in 2013. Since then, Neiman’s had been burdened by the debt load, which cut into profitability and limited the retailer’s ability to invest back into the business. The pandemic and the debt forced NMG to file for bankruptcy in May.
Neiman’s new board includes:
• Van Raemdonck.
• Meka Millstone-Shroff, a strategic operating adviser and board member to various companies, including Party City and Nanit.
• Pauline Brown, most recently chairman of North America for LVMH Moët Hennessy Louis Vuitton and board member on L Capital and the Donna Karan, Marc Jacobs and Fresh Cosmetics units of LVMH.
• Pamela Edwards, most recently chief financial officer of the Mast Global and Victoria’s Secret divisions of L Brands Inc.
• Kris Miller, most recently chief strategy officer for eBay.
• Scott D. Vogel, managing member at Vogel Partners LLC.
Pimco is a fixed-income investment manager, owned by Allianz SE financial services. Davidson Kempner Capital Management is an institutional investment management firm with more than $33 billion in assets. Sixth Street is an investment firm with about $47 billion in assets.