Ares Management Corp (NYSE: ARES)- and Canada Pension Plan Investment Board-owned retailer Neiman Marcus Group, could file for bankruptcy as early as this week, Reuters reported Sunday, citing people familiar with the matter.
Neiman Marcus Could Be Retail Casualty
Neiman Marcus, the Dallas-based operator of 43 luxury department stores including Bergdorf Goodman and Last Call branded stores, would be the first major retailer to declare bankruptcy during the coronavirus pandemic-driven downtown, the news agency said.
The retailer is negotiating a loan worth hundreds of millions with its creditors that would allow it to remain operational during the bankruptcy process, according to Reuters. Neiman Marcus has furloughed a substantial number of its 14,000 employees, the news agency said.
The bankruptcy could lead to Neiman Marcus’ acquisition or to some of its assets being sold at bargain prices.
Neiman Marcus Weighed Down By Debt
Neiman Marcus has debt of nearly $5 billion, in part as a result of the leveraged buyout carried out in 2013 by Ares Management Corp and CPPIB.
Last year, the retailer pushed back due dates for its debt in a restructuring agreement with some of its creditors at the price of incurring more interest costs.
Marble Ridge, holders of Neiman Marcus-issued bonds, sent a letter to the company on Thursday, stating that Neiman Marcus had failed to make interest payments due on the instruments.
The retailer was also accused of depriving Marble Ridge the value of its MyTheresa e-commerce business, moving it beyond the reach of creditors in a corporate reorganization.
Hudson Bay Co. (OTC: HBAYF), the owner of Saks Fifth Avenue, had considered bidding for Neiman Marcus, but it is unclear if the Canadian firm remains interested, according to Reuters.
Other major retailers are also undergoing financial hardship due to the coronavirus pandemic. Macy’s Inc. (NYSE: M) and Nordstrom Inc. (NYSE: JWN) are securing new financing and are borrowing against their real estate holdings. JC Penney Company Inc. (NYSE: JCP) is considering filing for bankruptcy to restructure its finances and mitigate expensive debt obligations.
ARES Price Action
Ares Management shares closed 3.98% higher at $33.20 on Friday.
Public domain photo via Wikimedia.
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