Neiman Marcus filed for bankruptcy and is now in a restructuring process so it can continue operating and reduce debt.
Neiman as been a struggling retailer with debt on its books and chairman and CEO Geoffroy van Raemdonck said on the restructuring agreement press release that the company was on track to improving profitability before the coronavirus outbreak killed consumer spend for the first half of 2020.
As a company in bankruptcy now, the retailer and its creditors have come to a restructuring agreement.
Here’s how that breaks down:
The idea is for the company to remain operational. The company will receive debtor-in-posession financing, which is debt that a company that owns assets as collateral raises. The new bankruptcy lender extends financing and has claims on assets held by the company like real-estate should the company fail to pay back the debt. Meanwhile, the new lender is a senior one, meaning that it has priority for repayment over existing creditors.
The DIP financing is $675 million and allows Nieman Marcus to fund its operations for the short-term.
As Neiman hopefully emerges from bankruptcy, it can receive $750 million of exit financing, which would completely refinance the $650 million in DIP financing.
Existing creditors are turned into majority equity holders, not debt holders.
The hope is that, as the company continues to operate and generate some sales, it can reduce its total debt by $4 billion. It currently has roughly $5 billion of debt.