Neiman Marcus implements $1 billion refinancing
Dallas, Texas-based department store retailer Neiman Marcus Group, Inc. has reportedly refinanced again, selling $1.1 billion in senior secured notes in order to repay other borrowings.
The refinancing operation was revealed in a confidential offering memorandum cited by WWD in a report published on Sunday.
The deal should allow Neiman Marcus’ owners and largest creditors – Pacific Investment Management Company LLC (Pimco), Davidson Kempner Capital Management, and Sixth Street Partners – to reduce their risk. However, the move does not de-leverage the company.
Having filed for Chapter 11 in May 2020, Neiman Marcus emerged from bankruptcy in September. At the time, its three senior lenders swapped debt for equity and became the retailer’s new owners.
The reorganization plan implemented as the company emerged from bankruptcy eliminated some $4.4 billion of its $5 billion in debt, as well as $200 million in annual interest payments.
When the retailer emerged from bankruptcy, it received a $900 million asset-backed loan from a consortium led by Bank of America, a $750 million exit financing package backed by Pimco, Davidson Kempner and Sixth Street, and a “first-in, first out” facility from Pathlight.
Nonetheless, Neiman Marcus has struggled post-bankruptcy, as it continues to face heavy interest payments on its remaining $1 billion in debt, an obligation that is particularly onerous in light of the recent revenue declines seen by the company.
With the latest round of refinancing, Neiman Marcus has slightly increased its level of debt, but Pimco, Davidson Kempner and Sixth Street have successfully reduced their exposure as lenders.
According to the memorandum cited by WWD, Neiman Marcus believes that its reorganization “provides ample liquidity and flexibility to respond quickly to evolving trends.”
However, the retailer also noted, “we will continue to be highly leveraged following the consummation of the transactions, and as a result, a significant amount of our cash flow will be used to pay interest and principal on our outstanding indebtedness, and we may not generate sufficient cash flow from operations, or have future borrowings available under our asset-based revolving credit facility, to enable us to repay our indebtedness, including the notes, or to fund our other liquidity needs.”
Other issues that the company said it is currently facing due to the Covid-19 pandemic include the lack of international tourism, which is having a particularly negative impact on sales at its stores in California, Florida, Texas and New York.
Furthermore, some of the retailer’s principal designer brand partners are considering transitioning from wholesale to concession arrangements, a move which would negatively affect Neiman Marcus’ revenues.
The memorandum also provided details concerning the company’s financial performance in the fiscal year ended August 1, 2020, as well as the six-month period ended January 30, 2021.
In the last fiscal year, Neiman Marcus posted an annual loss of $2.47 billion on revenues of $3.65 billion, compared to a loss of $531.7 million and revenues of $4.66 billion in the year before.
In the six-month period ended this January, the company’s revenues totaled $1.63 billion, falling from $2.42 billion in the same period in the previous year, reflecting a 6% decline in online sales and a 33.6% decrease in stores.
Earnings for the period were $1.83 billion, compared to a loss of $194.4 million in the prior-year period.
Neiman Marcus currently operates 37 namesake Neiman Marcus stores, two Bergdorf Goodman locations, and five Last Call stores.
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