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Neiman Marcus Group Inc. is the latest retailer to skip a payment due to bondholders as the coronavirus pandemic keeps stores closed, setting a clock for the company to restructure debt or file for bankruptcy.
The luxury retailer failed to pay a $5 million bond coupon on Wednesday, according to a letter from Marble Ridge Capital LP, a bondholder that took issue with Neiman over its efforts to manage its debt.
The missed payment triggers a 30-day grace period for Neiman to make the payment before Marble Ridge can act, a person familiar with the matter said. The missed payment is relatively small compared to the nearly $115 million Neiman owes on his debt later in April.
Marble Ridge said in the letter to Neiman’s board that the company was in default and the fund would pursue all remedies to protect its rights.
A Neiman spokeswoman declined to comment.
A bankruptcy filing would be a blow to private equity firm Ares Management Corp. and the Canada Pension Plan Investment Board, which bought Neiman Marcus in 2013 for $6 billion including debt. Previous owners were private equity firms TPG and Warburg Pincus LLC, which paid around $5.1 billion for the company in 2005.
Neiman joins other companies that have defaulted on debt payments since state and local government mandates on social distancing forced businesses to close their doors to consumers. JC Penney skipped a $12 million payout on Wednesday, starting the countdown to a potential bankruptcy filing within the next 30 days.
Neiman, 112, was already struggling before the health pandemic shut down stores. Like other department stores, it has faced increasing competition from online startups and new retail chains. Sears Holdings Corp. filed for bankruptcy in 2018 and closed hundreds of stores. Macy’s Inc. will close a fifth of its stores over the next three years.
Neiman was about to embark on a $4.7 billion debt restructuring before closing its stores during the first wave of the coronavirus pandemic.
Last year, the company carried out a comprehensive debt restructuring, with nearly all of its bondholders and lenders pushing the maturities of nearly all of its debt to 2023 and beyond. . But the pandemic, which has closed Neiman Marcus’s 43 or so stores since March 17, has severely crippled its cash flow.
During his more than two years in the role, managing director Geoffroy van Raemdonck reshaped the management team and added more services, including manicures, shoe repairs and custom embroideries. Last year, the company took a minority stake in Fashionphile LLC, an online seller of second-hand designer handbags and accessories, according to company executives. Earlier this year, the company announced it was closing most of its Last Call discount stores.
Write to Soma Biswas at [email protected] and Suzanne Kapner at [email protected]
