Downtown Neiman Marcus has been an landmark institution. Over Thanksgiving holiday, I took my family to lunch at the downtown Dallas location to enjoy the famous strawberry butter and popovers as well as the excellent old-timey service. On the way out, we got to enjoy the Christmas cheer. But we, like so many others apparently, did more looking than shopping.
The news today that Neiman Marcus is in talks to file bankruptcy associated with the $4.3 billion in debt is sad. The debt piled up as one leveraged buyout from a private equity fund purchased out another leveraged buyout from another private equity fund. Hefty sums were spent on various fees rather than reinvesting in a storied brand that created shopping as an experience. Some of the past behaviors to the creditors of Neiman Marcus is telling:
(From Grant's Interest Rate Observer) "The department store controversy started in March 2017 when Neiman redesignated its prized online business MyTheresa and other properties as unrestricted subsidiaries, meaning they were out of the creditors’ reach. On Sept. 18, management presented them to the equity owners, Ares Management L.P. and Canadian Pension Plan Investment Board. Such slick dealing has become commonplace in the private-equity world." The article goes on to describe various shenanigans and today's announcement is the logical result. Will the current crisis wake creditors up to the perils of private equity?
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