Neiman Marcus Group is closing in on a deal with lenders led by Pacific Investment Management that would slash the department-store chain’s debt load by more than half in exchange for control of the company. The plan would be part of a bankruptcy court filing that could come as soon as this week, Bloomberg reported.
- Dig Deeper: Lenders including Pimco, Davidson Kempner Capital Management and Sixth Street Partners would provide the company with more than $600 million to stay in business during the court process. Those lenders and others would swap their debt for equity in the reorganized company.
- Some retailers appear too broke to go bankrupt… J.Crew became the first national retailer to formally file for bankruptcy during the crisis. Experts say many retailers are likely holding off filing until they are able to make plans for the stores they need to close during bankruptcy.
- Be Smart: Turnarounds require funding during reorganization, and normally that comes in the form of debtor-in-possession (DIP) loans. Such lenders are willing to loan money to troubled companies because bankruptcy law allows them to be repaid before other lenders.
- Store closing sales are key: In the retail sector, DIP lenders depend on the inventory of stores to be closed to be repaid. The longer these sales take, the more aged the merchandise becomes, which means lenders are looking at a lower value. Once a company files for bankruptcy, the clock begins ticking on its effort to win approval of the bankruptcy court to stay alive. After 180 days in bankruptcy, a company’s creditors can push the court to halt the reorganization effort and start the process of liquidation, CNNBusiness noted.
- Heard on the Street: Debtwire: “We probably would have seen more file by now if stores were open… We’re clearly seeing a lot of companies engage bankruptcy advisors. But it’s not a great time to file. A lot of companies are on hold because you can’t get the money you need coming in from liquidation sales.”