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Law360 (May 7, 2020, 11:22 AM EDT) -- Another major retailer has hit bankruptcy amid store closures due to the coronavirus pandemic, as Neiman Marcus Group filed for Chapter 11 protection Thursday in Texas with a restructuring support agreement in place with the majority of its creditors to wipe out $4 billion of its debt.
In a first-day declaration filed in the U.S. Bankruptcy Court for the Southern District of Texas, Neiman Marcus Group Ltd. LLC Chief Restructuring Officer Mark Weinsten said the public health crisis, which led to the closure of its stores on March 18, "severely impacted" its business operations and liquidity.
"Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth," Neiman Marcus Group Chairman and CEO Geoffroy van Raemdonck said. "We have grown our unrivaled luxury customer base, expanded our industry-leading customer relationships, achieved higher omni-channel penetration, and made meaningful strides in our transformation to become the preeminent luxury customer platform."
However, like other retailers, the company said it was left reeling by "unprecedented disruption caused by the COVID-19 pandemic."
In a statement, Neiman Marcus said it entered Chapter 11 with a restructuring support agreement in place "with a significant majority of its creditors to undergo a financial restructuring, substantially reducing its debt load and interest payments and supporting continued operations during the COVID-19 pandemic and beyond."
An agreement is in place with holders of over two-thirds of the company's outstanding debt to turn the reorganized company's equity over to existing lenders, the company said.
Neiman Marcus said it has secured debtor-in-possession financing of $675 million from creditors to enable business operations to continue during the Chapter 11. The company said it plans to exit Chapter 11 with a "$750 million exit financing package that would fully refinance the DIP financing and provide additional liquidity for the business."
Neiman Marcus Group Ltd. LLC and multiple affiliates, including Bergdorf Goodman Inc., hit Chapter 11 with about $5 billion in debt, including $749 million owed on a senior secured asset-based revolving credit facility, roughly $2.2 billion owed in secured term loans, $561.7 million in principal outstanding on second-lien notes, and $1.2 billion owed on third-lien notes.
In its first-day declaration, the company said it was in recent years facing "the same macro-trends that have crippled many apparel and retail companies, including a general trend from brick-and-mortar to online retail channels and a shift in consumer demographics."
The company, which opened in 1907 with a store in Dallas, Texas, has grown to 67 stores across the United States, including Neiman Marcus and Bergdorf Goodman locations and an e-commerce business, the declaration said.
Neiman Marcus' Chapter 11 comes on the heels of clothing retailer J.Crew's bankruptcy filing earlier this week in the U.S. Bankruptcy Court for the Eastern District of Virginia, in what is forecast to be just the start in a flood of expected retailer filings.
J.C. Penney also missed an interest payment on certain secured notes last month, possibly setting it on a course toward a bankruptcy filing. In a notice with the U.S. Securities and Exchange Commission, the company said it "has elected to enter into the 30-day grace period with respect to the interest payment in order to evaluate certain strategic alternatives, none of which have been implemented at this time."
Neiman Marcus' Chapter 11 has been assigned to U.S. Bankruptcy Judge David R. Jones with an initial hearing scheduled for Friday, according to court records.
The debtors are represented by Anup Sathy, Chad J. Husnick and Matthew C. Fagen of Kirkland & Ellis LLP and Matthew D. Cavenaugh, Jennifer F. Wertz, Kristhy M. Peguero and Veronica A. Polnick of Jackson Walker LLP.
The case is In Re: Neiman Marcus Group Ltd. LLC, case number 1:20-bk-32519, in the U.S. Bankruptcy Court for the Southern District Of Texas Houston Division.
--Editing by Marygrace Murphy.
Update: This story has been updated with details from the company's first-day declaration, as well as counsel and case information.
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