An opinion of Neiman Marcus in The Shops in the Hudson Yards during the coronavirus pandemic on April 22, 2020 in nyc.
Noam Galai | Getty Images
Neiman Marcus may file for bankruptcy as soon as Sunday and is in discussions with its existing lenders about increasing roughly $600 million in emergency funding to fund operations through the restructuring, people knowledgeable about the situation tell CNBC.
In bankruptcy, the retailer will work to flush its $4 billion of debt remaining from the sale to Ares Management and the Canada Pension Plan Investment Board at 2013. Even before the coronavirus pandemic struck, that debt acted as an albatross, limiting its ability to invest in technology as new rivals like Yoox’s Net-A-Porter encroached on its once untouchable position in luxury retail.
Neiman Marcus is hoping its status as a luxury brand can allow it to emerge from the catastrophe a thinner and stronger company. The department store chain also owns high-end Bergdorf Goodman in New York’s midtown.
It does not intend to close any of its 43 Neiman Marcus stores as part of its planned Sunday bankruptcy filing, the people said. However, retailers whittle down their store footprint while.
Neiman Marcus formerly announced plans to wind down its off-price chain, Last Call, and shutter nearly all its 24 stores by the first quarter of its financial 2021, to focus on luxury.
All Neiman Marcus’ shops are closed since March 17 due to the coronavirus. The majority of its 14,000 employees have also been furloughed.
Hudson’s Bay Co., which owns Neiman Marcus rival Saks, has been regarded as a reasonable suitor for Neiman Marcus, once it registered for a long-anticipated insolvency and shed itself of onerous debt. But with revenue for markets rattled from the coronavirus and many retailers, funding a massive deal might be difficult.
Meantime, in bankruptcy, Neiman Marcus and its owners may want to take care of ongoing litigation with a few of its bondholders, Marble Ridge Capital. The debt finance has alleged the Neiman Marcus’ choice to split out its MyTheresa website at a \prior debt restructuring deprived the company’s creditors of a valuable advantage\. The firm, conducted by Daniel Kamensky, has said”it’ll take all necessary actions to protect its rights” Neiman Marcus has dismissed the allegations, according to previous reports.
The people requested anonymity because the information is confidential. Ares and neiman Marcus dropped to comment. Hudson’s Bay Co. and CPPIB didn’t immediately respond to a request for comment.
Neiman Marcus will mark the first major retail insolvency of this coronavirus pandemic, which has jolted the market and crippled the already struggling retail industry. It has also made the possibility of handling a bankruptcy a difficult one: it’s hard to plan liquidation sales of \shops, or whole store foundations, together with nonessential retailers. As many nations make plans to start lifting their coronavirus limitations , retailers need to decide how to handle varying mandates.
Landlords, meantime, will be made to rate the worth of a retailer on its land with little insight about how easily they could replace them.
A Neiman Marcus bankruptcy could deal a huge blow to Related Cos.’ glitzy Hudson Yards shopping mall in Manhattan, in which the luxury department shop is an anchor tenant, spanning multiple degrees with numerous restaurant options. If Neiman Marcus ever shut its shop there, it could activate requests for lease discounts from different retailers there or an exodus of tenants.
An agent from Connected didn’t immediately respond to CNBC’s request for comment.
Retail pain has quickened throughout the business. Gap cautioned in a filing this week that it might not have sufficient cash flow to satisfactorily finance its operations and stated that it’s seeking to renegotiate or reevaluate the terms of its rentals. The company also said it could provide”no assurances” it’ll be”able to recommence” business at present leases in Any Way.
And while malls had in recent years sought to bring”experiential” options into properties, like health spas, those too have dropped under pressure as the government has recommended”social distancing” to handle the pandemic.
Similar questions may face J.C. Penney, that will be considering its bankruptcy filing, people knowledgeable about the issue told CNBC. Any potential bankruptcy filing for the department shop, though, is \a couple weeks away. It’s yet to finalize the detail of any bankruptcy strategies and ascertain how much in bankruptcy financing it would need, people tell CNBC.
A spokeswoman for J.C. Penney declined to comment.
— CNBC’s Lauren Thomas contributed to this report.