US luxury department store chain operator Neiman Marcus Group is the latest retailer to file for bankruptcy protection amid the continued store closures and the slump in demand caused by the coronavirus pandemic. On Thursday, the company announced that it has filed for Chapter 11 bankruptcy with a federal court in Houston.
The company revealed in its statement that it has managed to reach a debtor-in-possession financing agreement with a group of creditors, which it owes a combined $675 million. Meanwhile, the Dallas-based company has agreed to cede control to other creditors in exchange for eliminating about $4 billion of its debts.
Prior to its bankruptcy filing, Neiman Marcus reported had a standing debt of around $5 billion to various lenders and institutions. The company added in its statement that the agreements should allow it to continue its operations while it attempts to put its books in order.
The embattled retailer previously reached a similar refinancing deal with creditors last year. The deal allowed it to avoid filing for bankruptcy during that time. However, due to the economic downturn and store closures brought about by the pandemic, Neiman Marcus has no longer able to keep up with its obligations. The company was forced to shut down its outlets, which were deemed as non-essential, as part of the government's efforts to mitigate the spread of the disease.
Neiman Marcus chief executive officer, Geoffroy van Raemdonck, mentioned in a statement that the company is facing an unprecedented disruption in its operations, which is why it had decided to seek federal assistance. The coronavirus pandemic had already forced it to implement drastic cost-cutting measures, including the furloughing of roughly 14,000 of its employees.
Since the start of the outbreak in the US, the company had been forced to close down 43 Neiman Marcus stores, two dozen Last Call stores, and two Bergdorf Goodman outlets in New York. The company assured its customers that it fully intends to come out of bankruptcy by early fall. It added that it expects to emerge with a $750 million package from its creditors that also supported its bankruptcy filing.
Marcus Neiman's bankruptcy filing follows a similar move made by US retailer J. Crew Group, which filed for protection on Monday. JC Penny is reportedly considering filing for bankruptcy in order to reorganize its finances and shed off debt. Other retailers such as Nordstrom have chosen to shore up their finances by tapping into unused assets. Nordstrom had announced that it had taken out new loans to strengthen its liquidity, using its properties as collateral.
