Neiman Marcus to seek bankruptcy protection due to the Coronavirus pandemic

Sources informed on Monday that Neiman Marcus Group is expected to file for bankruptcy protection later this week. Neiman, the sourced added, will be the 1^st major department store operator in the United States to lose the battle against the economic blow from the Coronavirus pandemic.

The health crisis has pushed the debt-laden chain of luxury department stores into temporarily closing all 43 of its countrywide locations, two of its New York-based Bergdorf Goodman stores, and around 24 Last Call stores in the U.S.

Neiman Marcus Furloughed Many Of Its 14,000 Workers

As per the sources, Neiman Marcus’ negotiations with creditors for a multimillion-dollar loan is near completion. The financing will help sustain minimal operations of the U.S firm during bankruptcy proceedings. The company was previously reported to have furloughed the majority of its 14,000 countrywide workers.

Neiman Marcus failed to make debt payments worth millions of dollars last week. One of these, according to the sources, only gave a few days to the department stores operator to avoid a default.

Standard & Poor’s (credit rating firm) estimates Neiman Marcus’ total borrowings at £3.86 billion. A part of it is attributed to the company’s £4.82 billion leveraged buyout by Ares Management Corp (NYSE: ARES), Canada Pension Plan Investment Board (CPPIB), and its owners in 2013.

Ares Management and Neiman Marcus refused to comment any further on recent news. CPPIB, on the other, didn’t respond to a request for comment.

Neiman’s competitors including Nordstrom, and Macy’s, are also struggling to maintain their financial stature amidst the pandemic. Both operators are currently seeking new financing to avoid filing for bankruptcy protection. J.C Penney, on the other hand, was already reported considering bankruptcy filing recently.

Neiman Marcus Deferred Its Financial Obligations In 2019

Neiman Marcus has been struggling to avoid bankruptcy filing for a few years. It negotiated a restructuring deal with its creditors in 2019 to defer its financial obligations. The move, however, resulted in expanding the company’s interest expenses.

Neiman’s owner, Ares Management Corp. is currently trading at £27 per share in the stock market that translates to a little over 5% decline in 2020 so far. The stock had dropped to as low as £18 per share on March 23^rd.

At the time of writing, Ares Management is valued at £6.28 billion and has a price to earnings ratio of 33.30.