Neiman Marcus files for bankruptcy, flattened by debt and idled by coronavirus
Neiman Marcus Group Inc. filed for bankruptcy protection Thursday after efforts to manage its crushing debt load unraveled amid the coronavirus outbreak.
The Chapter 11 filing in Texas gives the Dallas-based luxury retailer a break on its debts by letting it stay in business while management works out a recovery plan. Any turnaround will be complicated by the fact that its stores are shut and its workers furloughed to help stop the spread of COVID-19. Neiman Marcus sent most of its workers home in April.
The retailer manages more than 40 namesake stores across the U.S., two dozen Last Call locations, two Bergdorf Goodman stores in Manhattan and a Mytheresa in Germany. The latter is a bricks-and-mortar version of its fast-growing Mytheresa online merchant.
Most of the company’s department store rivals also suspended operations because of the virus, and the whole industry was already ground down by years of shopper defections to online merchants.
Preppy clothing retailer J. Crew also filed for Chapter 11 bankruptcy protection this week.
Neiman Marcus has been trying to simultaneously spend more on attracting customers while taming its debt load, with mixed success. Its borrowing ballooned after it was acquired in a 2013 leveraged buyout by Ares Management Corp. and the Canada Pension Plan Investment Board. The company reached a deal with creditors last year that delayed the due dates on some of its debt to buy time for a turnaround.
It also shuffled Mytheresa to a place in its capital structure that put the business beyond creditors’ reach, creating hard feelings with some bondholders.
The chain “has struggled for years to adapt among ongoing secular changes facing the department store sector, a circumstance that has deteriorated because of the operation disruptions from the coronavirus and recessionary conditions,” S&P Global Ratings analyst Mathew Christy wrote in an April 22 report.
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