World News

Neiman Marcus skips debt payment as potential bankruptcy looms

By Jessica DiNapoli, Mike Spector and Melissa Fares

NEW YORK (Reuters) – Neiman Marcus Group skipped a debt payment due this week, the latest sign of a cash crunch pushing the U.S. luxury department store chain to the brink of a possible bankruptcy after it temporarily closed stores amid the coronavirus pandemic.

The Dallas-based company’s decision to skip the payment has put it in default on that obligation, according to a letter sent to the retailer from a bondholder owed the money, hedge fund Marble Ridge Capital LP.

The retailer has made bankruptcy preparations that include discussions with creditors on financing to aid operations during court proceedings, Reuters previously reported. Neiman is struggling under more than $4 billion of debt taken on as part of a private equity takeover in 2013.

Most debt obligations have grace periods during which borrowers can still make payments. Neiman could still do so under terms of debt it did not repay this week, buying more time for bankruptcy preparations, a person familiar with the matter said.

In recent days it has held discussions with creditors on a broad restructuring plan, though it has yet to agree on terms for bankruptcy financing, people familiar with matter said.

A Neiman spokesman declined to comment on the skipped payment. The company previously said it is “evaluating all courses of action to preserve our financial strength.”

Neiman, like most brick-and-mortar retail chains, is facing an unprecedented sales downturn as U.S. officials have shuttered businesses deemed nonessential to slow the spread of the novel coronavirus. The virus has sickened more than 600,000 in the United States and resulted in deaths exceeding 30,000.

J.C. Penney on Wednesday skipped a debt payment and is exploring filing for bankruptcy protection as one option for reworking unsustainable finances, while Macy’s Inc tapped advisers for help managing its liabilities, Reuters has reported.

“Sadly, Neiman’s financial distress will come as no surprise to anyone,” Marble Ridge wrote in its letter, which Reuters reviewed.

Neiman closed its roughly 40 stores last month to comply with government mandates, and furloughed most of its 14,000 employees. But it is one of many retailers asking some of its workers to help fulfill online orders under what it says is an exception to the mandates for warehouses and mail-order services.

At one of its stores, in a high-end mall outside Philadelphia, a manager described the limited operation as an effort to “keep the business happening!” according to an email seen by Reuters.

If stopped on the way to work, employees should explain to police or other authorities that they are “contributing to critical infrastructure,” according to a letter Neiman provided to workers.

“The reality is they have hundreds of millions of dollars of inventory in stores that have been closed down,” said Robert Burke, founder of an eponymous luxury retail consulting firm.

“We are working closely with local authorities to ensure we operate as permitted,” a Neiman spokesman said in a statement provided to Reuters.

Workers at the King of Prussia location are provided a take-out lunch, gloves, masks, wipes and hand sanitizer, according to documents provided to Reuters.

(Reporting by Jessica DiNapoli, Mike Spector and Melissa Fares in New York; Editing by Dan Grebler)

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