Neiman Marcus buckles under crushing $5B debt

The scourge of Covid-19 has claimed yet another high-profile business victim.

The famed Neiman Marcus Group filed for bankruptcy protection on Thursday, marking one of the highest-profile collapses yet among retailers forced to temporarily close stores in response to the pandemic, reported.

The US luxury department store chain filed for bankruptcy in a federal court in Houston, and said it had reached agreement with creditors for US$675 million of debtor-in-possession financing to aid operations while it attempts to reorganize.

The Dallas-based retailer plans to cede control to creditors in exchange for eliminating US$4 billion in debt, the report said. Its debt currently totals about US$5 billion.

The company expects to emerge from Chapter 11 proceedings in early fall with a US$750 million package from creditors that provided its initial bankruptcy loan.

Neiman Marcus, laden with debt after a private equity takeover, reached a deal with creditors for more financial breathing room last year that avoided a bankruptcy filing but succumbed in recent weeks to government orders that closed businesses deemed non-essential to slow the spread of the novel coronavirus, the report said.

The pandemic is inflicting widespread financial pain on retailers forced to temporarily close stores. J. Crew Group filed for bankruptcy protection on Monday.

J.C. Penney is contemplating a bankruptcy filing of its own as a way to rework its unsustainable finances and Nordstrom recently moved to borrow against some of its real estate, the report said.

In a letter to customers, CEO Geoffroy Van Raemdonck stressed that Neiman Marcus had no plans to liquidate, CBS News reported. He said the retailer would continue to honor gift cards and credits as well as accept product returns.

Service on the company’s websites also will not be interrupted. The company said it is evaluating locations, but did not specify if it would close any stores, CBS News reported.

Van Raemdonck said the company and other retailers are “facing unprecedented disruption caused by the Covid-19 pandemic, which has placed inexorable pressure on our business.”

Covid-19 temporarily forced the closing of all 43 Neiman Marcus stores across the country, as well as the group’s two Bergdorf Goodman stores and Last Call outlets, all but stopping sales and crushing the company’s revenue streams, The New York Times reported. 

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