Neiman Marcus filed for bankruptcy protection on Thursday with its plans for a turnaround having been derailed by the coronavirus pandemic.
CNBC said the Chapter 11 filing was a “stunning fall” for the luxury department store chain, which “had been struggling with competition from online rivals and dwindling cash before the outbreak.”
“The company took on an untenable amount of debt as part of two leveraged buyouts by private-equity firms and did not respond quickly enough to changes in shopping habits,” The New York Times said. “Together, those developments left the group in a precarious position even before the virus hit.”
Neiman said it would use the bankruptcy process to implement a restructuring agreement with creditors that will enable it to substantially reduce its $4 billion debt load and interest payments and continue operating “during the COVID-19 pandemic and beyond.”
Creditors have agreed to provide Neiman with $675 million in loans to fund operations through bankruptcy. The company expects to emerge from Chapter 11 in the fall, at which point its lenders will become majority owners of the business.
“Like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business,” CEO Geoffroy van Raemdonck said in a news release.
As the Times reports, the outbreak “has been disastrous for the already weakened retail industry,” with sales of clothing and accessories falling by more than half in March. J. Crew filed bankruptcy earlier this week.
Neiman, which has long been known for its upscale brand, strong customer service, and Christmas Book holiday catalog, closed all 43 Neiman Marcus stores, as well as its two Bergdorf Goodman locations and Last Call outlets, at the end of March.
Van Raemdonck said that prior to the outbreak, the company had “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.”
The agreement with creditors, he said, “gives us additional liquidity to operate the business during the pandemic and the financial flexibility to accelerate our transformation.”
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