Neiman Marcus: May File Bankruptcy

“People familiar with the matter” are predicting this is the week retailer Neiman Marcus finally files for Chapter 11. Admittedly, this has been predicted before, as in our earlier article about the company on March 27. The difference this time is that the already beaten up luxury retailer has had to furlough essentially all its employees since March 30, and with no end in sight.

For BDC watchers the question then and now remains how the only player with exposure – TPG Specialty (TSLX) – is going to fare in an economic environment that must be worse than any worst case scenario considered when the BDC first invested in an asset-based financing to Neiman in the IIIQ 2019. Miraculously, TSLX has managed to extricate itself from some of the worst performing companies without a financial scratch in recent years. However, we’re increasingly worried that may not be the case this time given the almost shut-down of retail and the general consensus that only a further catastophe will follow the long playing retail apocalypse.

We have added Neiman and the $71.9mn invested by TSLX to the Underperformers list. It’s a testament to TSLX’s track record that we do so with trepidation even as Neiman teeters on the brink. We’ll have to wait now till the filing occurs and some dust settles before ascertaining how this turns out for the BDC which was still carrying its position at par at 12/31/2019. The TSLX conference call in May could be a time for revelations. Or not, if matters are not then settled.