Majority of Neiman Marcus lenders, noteholders sign on to 3-year debt extension

UPDATE: March 26, 2019: Neiman Marcus on Tuesday announced that more than 55% of term loan lenders and 60% of unsecured note holders have agreed to a plan that aims to extend debt maturities by three years. The retailer needs at least 95% of parties from each group to sign on to the plan before it can be approved.

Dive Brief:

Neiman Marcus and majority noteholders and term lenders have reached an agreement to extend the maturities of the notes and term loans by three years, according to documents filed with the SEC on Friday morning. The company has roughly $4.6 billion in debt.
In the document, the company noted it resumed on and off again confidential negotiations on or around Feb. 13, during which the company pitched presentations that included MyTheresa — the e-commerce unit the company transferred to another part of its business last summer. The movement of MyTheresa sparked concern from many creditors and its inclusion in the financial agreement appears to be a linchpin in the talks.
The company also noted it disclosed to noteholders and term lenders that for the second fiscal quarter ended Jan. 26, it expects to report an increase in comparable revenue on a U.S. basis of 0.5% to 1%., its sixth consecutive quarter of comps revenue rises. In a press release emailed to Retail Dive on Friday, the company said the pending agreement will provide "ample runway" to execute its transformation plan.

Dive Insight:

The relationship between Neiman Marcus and its creditors has been tense for months as negotiations have continued to rise and fall, always coming back to MyTheresa. That's been the fundamental difference between proposals from the term lenders and noteholders, and the company. So it comes with little surprise that the final proposal put the e-commerce unit on the table as some type of collateral for some of the debt.

MyTheresa, positioned as the "highest quality business model in online luxury," brought in roughly $345 million (or € 303 million Euros) in group revenue (80% of that being international online revenue) and 177,000 new customers in fiscal 2018, according to the company's presentation. It also touts a healthy loyalty from its top customers, with 26% of revenue being driven from the top 3% of customers. The company views a high potential for international expansion.

The proposal is part of a larger turnaround plan for Neiman Marcus, dubbed "Project Rolex," and centers around a "ignite to win" strategy. The priority is to drive $5 billion in total sales and $700 million in adjusted EBITDA within five years. To do that, the company is banking on three big things: deeper customer loyalty relationships, more seamless experiences and the creation of "magic" (which refers to laying out a relevant service model and the store of the future).

This has been a key part of CEO Geoffroy van Raemdonck's role since he stepped into it just a year ago. Leadership also includes newcomers like Katie Mullen, chief transformation officer, Carrie Tharp, chief digital officer, Adam Orvos, chief financial officer and Darcy Penick, president of Bergdorf Goodman — all of whom have been in their roles for less than a year.

The company is also still facing a lawsuit from one of its most vocal creditors, Marble Ridge, which alleges the company intentionally transferred the MyTheresa business out of the reach of creditors.