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Neiman’s Gets Green Light for DIP Financing

Sindhu Sundar

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Neiman Marcus Group is entering the next phase of its bankruptcy proceedings. 

On Tuesday, the Texas bankruptcy court overseeing the case granted final approval for the retailer’s proposed $675 million debtor-in-possession financing package. The company had also entered the proceedings with a proposed $750 million exit financing facility, meant to help a potential restructured version of the company gain its footing when it leaves bankruptcy court. 

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The retailer’s schedule in bankruptcy court envisions having a reorganization plan confirmed by early September, roughly within four months of when it filed for bankruptcy in May.

In the meantime, the DIP funding will help the retailer continue to navigate the bankruptcy process as it cautiously reopens stores during the ongoing coronavirus pandemic. The retailer has already gotten access to a portion of the funding so far — it has previously drawn upon some $275 million that it received after the court granted interim approval to its financing request in early May, at the start of bankruptcy proceedings. Being able to draw on that funding allowed the retailer to work with its key vendors to continue receiving shipments, its advisers have said.    

“Vendors have expressed willingness to resume their relationships with the debtor, and replenish the debtors’ inventory,” according to proffered testimony on Tuesday by Neiman’s chief restructuring officer Mark Weinsten, managing director at consulting firm Berkeley Research Group LLC. 

“And the debtors will continue to use their cash on hand to rebuild their inventory.” 

The DIP plan was approved with some modifications that would make it easier for the unsecured creditors’ committee to pursue recoveries.

In court hearings during the bankruptcy, Neiman’s advisers have generally repeated the highlights of a familiar story among many retailers that are undergoing Chapter 11 restructuring this year.

That Neiman’s proceedings began during the unprecedented global pandemic that essentially forced it to temporarily close stores in mid-March, cutting off revenue; that a bankruptcy filing in this context prompted concerns among vendors, which indicated they would stop shipping products until the company could demonstrate it could still be viable, and that the retailer obtained bankruptcy financing through “hard-fought negotiations” with groups of existing lenders.  

At the time of its bankruptcy, the luxury retailer had said it has some 67 stores around the country, including the two Bergdorf Goodman stores in Manhattan and Last Call units that sell discounted and clearance items.

As of earlier this month, the group reopened 12 Neiman Marcus and seven Last Call stores for curbside appointments and for appointment shopping. Over the course of its reopening, the company has fared “better than initially projected,” with increasing cash receipts, and more cash on hand, Weinsten has said. 

But even though Neiman’s entered its Chapter 11 proceedings with roughly $100 million in cash, it experienced a “negative cash flow” of about $300 million during the first two months of the bankruptcy, while its stores stayed closed, according to the company. 

And even as sales levels now are apparently doing better than expected, revenues are still far from pre-COVID-19 levels, the company has said. Neiman’s advisers also say it still isn’t sure when all the remaining stores will reopen.  

Separately, the reorganization proceedings have drawn renewed attention to the role of its leveraged buyout sponsors — private equity fund Ares Management and investment fund Canada Pension Plan Investment Board — in the transfer of the online retailer Mytheresa before the bankruptcy.

The unsecured creditors’ committee in the case, which includes Marble Ridge, Simon Property Group, Chanel and Kering Americas Inc., is continuing to take a closer look at those transactions.