US luxury department store chain operator Neiman Marcus Group is reportedly preparing to file for bankruptcy protection. The Texas-based firm is expected to make the move this week, making it one of the first major department store operators to succumb to the economic effects of the coronavirus pandemic in the US.
Since the coronavirus pandemic had started to spread in the US, the company had been forced to temporarily shut down all of its 43 stores nationwide, including two dozen Last Call stores and two of its Bergdorf Goodman outlets in New York. The company also had to furlough its workforce of roughly around 14,000 employees. The closures resulted in massive losses for the company and it has reportedly been left with no other option but to file for bankruptcy.
According to reports citing sources with knowledge of the matter, Neiman Marcus is now at the final stages of negotiations with its creditors. The company is seeking additional loans to help it continue some of its operations during the bankruptcy proceedings.
Sources claim that the company could announce its filing within the coming days. The urgency of the filing comes as Neiman Marcus struggled to continue paying its debts. Last week, the company reportedly missed millions of dollars in debt payments, including one that will only be giving it a few days before the loan defaults.
The exact amount it owes had not been disclosed but sources reveal that it is in the hundreds of millions of dollars. However, a report from credit-rating firm Standard & Poor's pegs the company's total borrowings at an estimated $4.8 billion. The estimate is taking into account the remaining amounts from a legacy debt incurred by the company when it was bought out by its owners, private equity firm Ares Management Corp and Canada Pension Plan Investment Board, in 2013.
Neiman Marcus has been trying to avoid bankruptcy for the past few years, moving quickly to secure restricting deals with some of its creditors. However, the strategy has snowballed and added to the company's interest expenses. The current health and economic crisis has likely served as the final nail on the coffin, with the company now unable to continue making debt payments.
Like Neiman Marcus, other US department store operators are also feeling the pinch of the continued stay-at-home orders and lockdowns caused by the ongoing coronavirus pandemic. Most companies are scrambling to secure their liquidity and strengthen their balance sheets to weather the storm, while others are inching close to following Neiman Marcus's fate. JC Penny Co is reportedly close to giving up and is considering filing for bankruptcy protection as its stores continue to be closed. Companies such as Macy's and Nordstrom have quickly moved to secure new financing, using their properties to obtain new loans.
