Neiman Marcus becomes US retail casualty

Dallas-based luxury retailer will write off most of its $5bn debt in a deal that hands control to its lenders

Upmarket US department store chain Neiman Marcus has become the latest retail casualty of the pandemic after filing for Chapter 11 bankruptcy protection.

Its agreement with creditors will wipe out $4bn (£3.2bn) of a $5bn debt pile and provide $675m to keep trading while the Dallas-based chain tries to restructure. 

The lenders will take control of the retailer, mirroring a deal struck by J Crew on Monday to seek protection of its own.

Neiman Marcus is more than a century old and sells labels such as Dolce & Gabbana, Jimmy Choo and Valentino. It let most of its 14,000 employees go in March after closing all 43 stores, along with two Bergdorf Goodman outlets in New York and about two dozen outlet shops.

The company, saddled with unmanageable debt following a 2013 private equity takeover by Ares Management and the Canada Pension Plan Investment Board, last year struck a deal with creditors that avoided bankruptcy.

However, being forced to close its physical stores proved to be the final straw even though about a third of its sales are made online.

Chief executive Geoffroy van Raemdonck told the Wall Street Journal: "Everything was going well in our transformation, but we had massive interest payments. Covid threw everything off track. This is an opportunity to reset our financial structure.”

S&P analyst Mathew Christy said last month that Neiman Marcus had struggled for years to adapt as shoppers abandoned the high street to go online and coronavirus had piled on even more pressure.

The company expects to emerge from the Chapter 11 in the autumn.