U.S. high-end department store chain Neiman Marcus has hired investment bank Lazard Ltd to explore ways to bolster its balance sheet as it seeks relief from a US$4.9 billion debt pile, people familiar with the matter said on Friday.
Neiman Marcus is in no immediate risk of bankruptcy, the sources said. However, the move makes it the highest-profile U.S. retailer to turn to a debt restructuring adviser so far this year, as consumers increasingly embrace the internet for shopping.
The sources asked not to be identified because the matter is confidential. Neiman Marcus did not immediately respond to a request for comment, while Lazard declined to comment. One of Neiman Marcus’ current owners, Canada Pension Plan Investment Board (CPPIB), declined to comment.
Neiman Marcus operates 42 Neiman Marcus Stores across the United States and two Bergdorf Goodman stores in Manhattan. The company also operates 27 Last Call clearance centers, according to its website.
In addition to grappling with headwinds affecting other U.S. retailers, a plunge in energy prices has further hit Neiman Marcus, because many of its affluent shoppers in Texas have curbed their spending.
The stronger U.S. dollar has also been negative for Neiman Marcus, curbing spending at its Bergdorf Goodman department stores that are popular with New York tourists.
Much of Neiman Marcus’ debt load stems from its US$6 billion leveraged buyout in 2013, when its current owners, Ares Management LP and CPPIB, acquired it from other private equity firms.
Unsecured bonds of the Dallas-based company trade at a deep discount, indicating investor concern about full repayment. Its bonds due in 2021 traded at 58 cents on the dollar this week, according to Thomson Reuters data. Neiman Marcus also has an approximately US$3 billion term loan that was trading at 80 cents on the dollar, according to Thomson Reuters LPC data.
Earlier this year, the department store withdrew its initial public offering, two years after it had announced its plans to U.S. regulators. At the time, the department store did not explain why it withdrew its IPO registration.
Despite its challenges, Neiman Marcus has been renovating existing stores and still plans on opening new stores, including a flagship location at New York City’s Hudson Yards development.
(Reporting by Lauren Hirsch in New York; and Jessica DiNapoli in Las Vegas; Editing by Bernadette Baum and Matthew Lewis)
Photo courtesy of Reuters/Rick Wilking