Neiman Marcus‘s next chapter could begin in just two weeks.
On Friday, the luxury retailer got the nod on its reorganization plan at a hearing before bankruptcy judge David Jones, the chief judge for the federal bankruptcy court for the Southern District of Texas.
“Today is the debtor’s day,” said Matthew Fagan, an attorney at Kirkland & Ellis for Neiman, who noted that Neiman is expected to wrap up the case in two weeks after collapsing into bankruptcy with more than $5 billion in debt. “We have been working toward this day since before May, since we’ve been working on our capital structure.”
Fagan told Judge Jones Neiman garnered reorganization support from 13,000 employees, customers and vendors in just four months’ time and cited the help of creditors that were able to “put aside their disputes.”
“Neiman Marcus today will get a second chance to remake itself as the undisputed leader in luxury retail,” Fagin said, adding that the premium department store retailer is “equipped with a very strong management team to lead the company into the future.”
The restructuring, which keeps current chairman and CEO Geoffroy van Raemdonck in his post, allows the upscale chain to wipe out roughly $4 billion in pre-petition debt, with no near-term maturities. Neiman also secured $750 million in exit financing facility commitments from creditors.
Van Raemdonck has credited Neiman’s omnichannel execution with propping up its business during the temporary coronavirus shutdowns.
Neiman racked up its heavy debt load in the wake of two leveraged buyouts, first in 2005 when it was acquired by two private equity firms, Texas Pacific Group and Warburg Pincus, for $5.1 billion. Debt built up during the Great Recession and was compounded by a second leveraged buyout in 2013, when private equity firm Ares Management and the Canada Pension Plan Investment Board acquired Neiman for $6 billion.
The latter acquisition also saw its owners subsequently transfer its MyTheresa.com asset to a separate entity that was hotly contested in the bankruptcy case because unsecured creditors believed the deal took away a valuable asset that could have helped pay down their claims.
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Plus, alleged actions of Marble Ridge Capital hedge fund founder Daniel Kamensky add a new layer of drama to the bankruptcy. On Thursday, Kamensky was hit with criminal charges for securities fraud and extortion in connection with alleged actions in the Neiman bankruptcy and faces civil charges from the Securities and Exchange Commission as well. The allegations in both legal matters still need to be proved, and Kamensky, who did not respond to a request for comment, is innocent until proven guilty.
Despite the Kamensky allegation, the retailer and its creditors were able to secure a settlement regarding MyTheresa. The plan includes Neiman setting aside $10 million to help satisfy unsecured creditor claims. It also includes millions of shares of Series B preferred stock in MyTheresa, valued at up to $175 million, for distribution to unsecured creditors.