What: USD 1.1 billion in senior secured notes were sold to repay other borrowings

Why is it important: The owners of the Dallas-based luxury retailer have reduced their exposure way down as lenders, while Neiman’s slightly increases its debt level from what it had been since emerging from bankruptcy

The deal enables NMG’s three owners — also the retailer’s largest creditors — to greatly reduce their risk, but doesn’t de-leverage the luxury retailer. NMG emerged from bankruptcy on 25 September 2020 with its senior lenders — Pacific Investment Management Company LLC (Pimco), Davidson Kempner Capital Management and Sixth Street Partners — swapping debt for equity and becoming the new owners. To get Neiman’s out of Chapter 11, the three owners funded a USD 750 million exit financing package.

The reorganization plan eliminated USD 4.4 billion of the USD 5 billion or so in debt Neiman’s had on its books back then, and about USD 200 million in annual interest payments. Yet Neiman’s still pays significant interest (estimated at USD 114 million annually as of January 2021) on the USD 1.6 billion in debt it now has.

The memorandum states that Neiman’s believes its reorganized operating structure “provides ample liquidity and flexibility to respond quickly to evolving trends.” But there are other concerns related to the absence of international tourists and to some top designer brand partners that have or are considering converting from wholesale to concession arrangements.

On the revenue side, online sales were down 6% for the six months ended 30 January 2021, and down 4.1% for the 12 months through 30 January 2021. Sales at stores were down 33.6% for the six months ended 30 January 2021, and 47.3% for the 12 months through 30 January 2021.

NMG currently has 37 Neiman Marcus stores, two Bergdorf Goodman stores, and five Last Call units. The memo reiterates that the remaining fleet is “particularly well positioned and smart investments are being made to continue optimizing the in-store experience.” In addition, Neiman’s executives have been working hard to gain ground in e-commerce and investing USD 85 million in supply chain innovation.

The memo also indicates:

•    About 78% of NMG’s customers are female, about 64% of the customers have an annual household income over USD 250 000, and about 30% of customers have a household net worth greater than USD 5 million.

•    About 46% of Neiman’s customers are Generation X or Millennials, and they are active on social media.

•    About 30% of total U.S. revenues in the last 12 months were generated by Neiman’s InCircle loyalty program members who achieved reward status. These customers spend about nine times more than other customers.

•    About 40% of net sales are from customers who spend USD 10,000 or more annually.

NMG has refinanced again