Neiman suffers bankruptcy; idled by virus and crushed by debt 

Amidst the coronavirus outbreak, Neiman Marcus Group has filed for bankruptcy after efforts to manage its crushing debt load unravelled. Creditors will take control of the luxury department store chain, according to plans outlined in a Chapter 11 petition filed in Houston. The move gives the Dallas-based chain a break by letting it stay in business while management works out a recovery plan.

The company said it has support from a substantial majority of its creditors, who agreed to put up $675 million to get Neiman Marcus through the court process. They will also provide $750 million in exit financing. When the company emerges from bankruptcy in early autumn, management expects to see about $4 billion cut from its existing debt load the legacy of a 2013 leveraged buyout by current owners Ares Management Corp. and the Canada Pension Plan Investment Board. Neiman listed debt obligations of about $5.5 billion in its filing.

The turnaround will be complicated by the fact that Neiman’s stores were shut and its workers furloughed to help stop the spread of the Covid-19 outbreak. Some of the stores have been partially reopened with the option for curbside pickup, according to a company statement.

Neiman Marcus manages more than 40 namesake stores across the U.S., two Bergdorf Goodman stores in Manhattan, about two dozen Last Call locations and a Mytheresa in Germany. The latter is a brick-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, at a time when the whole industry was already ground down by years of shopper defections to online merchants. Neiman has been trying to simultaneously spend more on luring customers while taming its debt load, with mixed success. The company reached a deal with creditors last year that put off 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 the reach of creditors, creating hard feelings with some bondholders that still linger. Mytheresa isn’t part of the Chapter 11 process and will operate independently.