Neiman Marcus: Considering Chapter 11 Filing

Whenever we hear from multiple news outlets that unnamed sources have indicated a company is “considering” filing for bankruptcy we assume some sort of negotiation is going on, and that same someone is leveraging the press for its own advantage. We should also say that 9 times out of 10 of late the rumor has been followed with an actual filing, so it’s worth paying attention to these anonymous whisperings.

Now, iconic retailer Neiman Marcus is said to be close to asking for bankruptcy court protection, which does not seem very surprising given the environment. We shall see and report back.

The only BDC with exposure is the acknowledged master of troubled company lending TPG Specialty (TSLX). The public BDC advanced funds in the form of an asset-based loan in the IIQ 2019 “to support the company’s strategic initiatives”. Obviously that was before the Covid-19 came along to test retail like never before. At year-end the debt was valued at par.

Most recently, though, and despite the ABL nature of the lending, the Term Loan is trading at a (20%) discount according to Advantage Data’s records. That price may not be meaningful in this hot-house environment. However, should Neiman file for bankruptcy, find no buyers and move to liquidation – as has happened to other retailers – the value of the 2021 Term Loan might soon be tested. To date TSLX has dodged every retail bullet. The next few months will be its greatest test of which Neiman Marcus may not even be the most trying one.