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Neiman Marcus Debtholders Prepare for New Round of Talks

Katherine Doherty and Eliza Ronalds-Hannon
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Neiman Marcus Debtholders Prepare for New Round of Talks

(Bloomberg) -- Neiman Marcus Group Ltd. and its creditors are renewing talks about reworking the company’s debt before its term loan comes due next year, with some agreeing to curb their trading during confidential negotiations, according to people with knowledge of the matter.

The luxury department store chain is reaching out to creditors and their advisers to see if they can get past issues that stymied previous efforts, said the people, asking not to be identified discussing a private matter. Certain unsecured bondholders have agreed to restrict their trades for a second time after the previous talks fell apart at the end of last year, the people said.

“We view these negotiations as an ongoing process that will likely take time,” Dallas-based Neiman Marcus said in a statement. “Periodic pauses are a natural part of the process and are absolutely expected to occur on a regular basis. We believe a mutually beneficial solution can be reached and intend to continue to seek a result that will benefit the company and its various stakeholders.”

Some retailers had a respectable holiday season, giving them more time to fend off online rivals and lure shoppers back into stores. That said, Neiman Marcus has a term loan with about $2.8 billion outstanding that matures in 2020, and meanwhile it faces a lawsuit from Marble Ridge Capital LP.

The investment firm claims that the retailer violated its debt covenants and may have defaulted on its bonds when it transferred the MyTheresa online subsidiary beyond the reach of creditors. Neiman Marcus says the move was expressly permitted under terms of its debt agreements.

The price of Neiman’s first-lien term loan has given back most of a rally that started in the middle of last year, though it has recovered from a recent record low. Quotes now hover at less than 89 cents on the dollar with a 13 percent yield. The unsecured notes have fared worse, with the pay-in-kind bonds due October 2021 quoted at less than half their original value.

At the end of November, Neiman and its creditors failed to agree on the early reworking of Neiman’s debt load. Neiman considered it a first step in negotiations and would have agreed to more talks, according to people familiar with the matter. A representative for the company later said that Neiman was confident it could reach an accord, and that it has ample time to refinance.

The MyTheresa asset transfer has been at the heart of heated disputes between the company and its creditors. Marble Ridge’s lawsuit claims a fraudulent transfer occurred to benefit its controlling shareholders, Ares Management Corp. and the Canadian Pension Plan Investment Board. Neiman’s counterclaim called Marble Ridge’s account defamatory and asked the court for damages.

Marble Ridge representatives didn’t immediately respond to messages seeking comment on whether the firm will participate in the new talks. Neiman Marcus has said in court papers that Marble Ridge declined to join creditor groups in previous negotiations. “Instead, it has attempted to disrupt Neiman Marcus’ negotiations with the creditor groups by making false public statements that Neiman Marcus is in default,” Neiman said.

In the meantime, Chief Executive Officer Geoffroy van Raemdonck, who took over the top job a year ago, is overhauling senior management as some long-time executives depart. Among them are President and Chief Merchandising Officer Jim Gold, according to a regulatory filing, as well as the executive vice president for Neiman Marcus stores and the head of the company’s innovation lab, according to the Dallas Morning News.

Neiman is working with law firm Kirkland & Ellis LLP and investment bank Lazard Ltd. An ad hoc group of first-lien bank loans and bonds is working with Wachtell Lipton Rosen & Katz and Ducera Partners LLC while a separate group of majority bondholders is working with Paul Weiss Rifkind Wharton & Garrison LLP and Houlihan Lokey Inc.

(Updates with Marble Ridge stance on new talks, quote from Neiman’s counterclaim, starting in the eighth paragraph.)

--With assistance from Shannon D. Harrington.

To contact the reporters on this story: Katherine Doherty in New York at kdoherty23@bloomberg.net;Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Dawn McCarty

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