On the heels of reports that a filing was coming, Neiman Marcus has filed for Chapter 11 bankruptcy on Thursday. Neiman Marcus Group was pin-pointed as likely to resort to Chapter 11 protection given that “the debt-laden Dallas-based company has been left with few options after the pandemic forced it to temporarily shut all 43 of its Neiman Marcus locations, roughly two dozen Last Call stores and its two Bergdorf Goodman stores in New York,” according to CNBC, which first reported the filing on Thursday morning.
In connection with Thursday’s filing in a U.S. Bankruptcy Court in Houston, Texas, Neiman Marcus says that it is aiming to eliminate $4 billion of its more-than-$5 billion in debt. The retailer revealed that it has obtained support from “a significant majority of its creditors to undergo a financial restructuring, substantially reducing its debt load and interest payments and supporting continued operations during the COVID-19 pandemic and beyond.” Such funding comes in the form of “$675 million debtor-in-possession financing from creditors holding over two-thirds of the company’s debt,” the Wall Street Journal reports, while the creditors have “also committed to $750 million in exit financing.”
The Group’s CEO Geoffroy van Raemdonck said in a statement that the company had been “making solid progress on our journey to long-term profitable and sustainable growth” before COVID-19. “We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omni-channel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform. However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business.”
Founded in 1907 in Dallas, Texas, Neiman Marcus has been experiencing falling sales and dogged rumors of prospective sale in recent years, with the Group’s business – which has grown to include off-price Last Call stores, Bergdorf Goodman, and fashion e-commerce site MyTheresa, the latter of which it acquired in 2014 – has been pegged as a likely candidate for bankruptcy, particularly in light of the Coronavirus. Despite showing “some improved selling trends last year,” speculation about its viability dates back before the onset of the global health pandemic as many retailers have struggled to evolve to meet consumers digitally-centered shopping habits, as well as a larger movement away from buying as much clothing as they had in the past.
Reports of the storied retailer’s plan to file for bankruptcy intensified in mid-April after the department store chain – which is “famous for selling $5,000 evening gowns and $3,000 designer handbags” and acting as a “retail pioneer with a status-conferring charge card” and “leader in online shopping,” deriving one-third of its sales from the web in 2019, the WSJ notes – missed debt payments totaling millions of dollars, including one (in which the retailer owes nearly $80 million) “that only gave it a few days to avoid a default.”