NEIMAN MARCUS REACHES AGREEMENT WITH CREDITORS TO RESTRUCTURE DEBT
Neiman Marcus has reached an agreement with a majority of its lenders to extend debt maturities by three years, which the Dallas-based luxury retailer said will give it the time it needs to carry out plans to grow out of its debt problems.
The agreement is with holders of 55 percent of its term loan and 60 percent of its unsecured notes and follows a preliminary agreement announced March 1.
The lenders’ show of support is a win for CEO Geoffroy van Raemdonck, who said Monday that the agreement “provides substantial value to our lenders and creates ample runway to execute on and complete Neiman Marcus Group’s transformation plan into a luxury customers platform.”
Now the next hard chapter begins as Neiman Marcus tries to fix its balance sheet by growing the company. Two leveraged buyouts within 10 years left the company with what credit analysts call an unsustainable level of debt. The retailer’s almost $5 billion in debt equals its annual revenue.
The $2.8 billion term loan that was to mature in October 2020 is now extended three years and requires the company to repay $150 million in unsecured notes. The term loan was amended to pay down $550 million that’s funded with new second lien notes that mature in April 2024. Lenders get enhanced credit protections such as increase in interest rates and amortization, more restrictive covenants, more protections to call in their loans and more collateral.
“The commitments we have obtained for this transaction are a validation of our business and transformation strategy and our leadership team,” van Raemdonck said. “We are appreciative of our lenders for their support and for the confidence they have put in our long-term success.” Neiman Marcus said these amendments to its debt agreements will give it time to drive sales to more than $5 billion and adjusted earnings before interest, taxes and other items to more than $700 million within five years. In its fiscal 2018, Neiman Marcus reported comparable adjusted earnings of $477.1 million and sales of $4.9 billion.
