Investors Propose $700M In DIP Financing For Neiman Marcus

Amid the retailer’s reported impending bankruptcy, an investor group is intending to provide an alternative to a $600 million financing arrangement for Neiman Marcus Group and pressure it toward a sale. The investor group includes Third Point LLC and Mudrick Capital Management LP, Reuters reported.

Mudrick recently turned in a $700 million debtor-in-possession (DIP) financing proposal, per unnamed sources in the report. Beyond Third Point, it is also probable that Fir Tree Partners will be included in the group that is presenting the financing for consideration.

Neiman Marcus would have to look for a sale while in bankruptcy prior to reconfiguring its operations and finances with the $700 million loan. However, the retailer reportedly intends to use a $600 million loan that it worked out with creditors over a period of weeks.

Neiman Marcus was reportedly close to finishing negotiations for that arrangement over the weekend to help maintain its operations as it works through bankruptcy. The plan, as of now, seeks to have creditors forgive most of the retailer’s $5 billion in debt for ownership.

The retailer is said to be gearing up to ask for bankruptcy protection in a federal court as early as Monday (April 27). Its sales were severely impacted as COVID-19 forced temporary closures of its Neiman Marcus locations, two Bergdorf Goodman shops and approximately 24 Last Call stores.

Neiman Marcus, along with other physical retailers, has grappled with a consumer trend toward eCommerce and discount retail merchants. High-end eTailers like Farfetch Ltd. and Yoox Net-A-Porter Group have also increased the competitive pressure on the retailer.

In separate news, JCPenney was reportedly considering a bankruptcy filing. The retailer has enough cash to sustain itself in the months to come, but was mulling bankruptcy as a way to reorganize its unsustainable finances and save on future debt payments.

The coronavirus has impacted traditional department store operators in addition to other merchants that have had to shutter locations to stem its spread.