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Neiman Marcus Group Inc. is preparing to file for bankruptcy protection as soon as Wednesday, with plans to restructure its debt in hopes of reopening most of the luxury chain's stores after the coronavirus pandemic, according to people familiar with the matter.
The lenders who would steer Neiman through bankruptcy are considering several options, including selling the business outright or closing some of Neiman's 43 department stores to continue operating in a slimmed-down form, they said.
The company is near a debtor-in-possession financing agreement with existing lenders, a person familiar with the matter said. The company has about $4.7 billion in debt.
Neiman failed to make interest payments last week, starting a clock on a potential bankruptcy filing. One of the missed payments had a grace period of just five days. Reuters earlier reported that Neiman could file for bankruptcy protection as soon as this week.
A potential buyer is Saks Fifth Avenue parent Hudson's Bay Co., which could make an offer for the troubled retailer after Neiman tips into bankruptcy, according to a person familiar with the matter. Saks has tried unsuccessfully to merge with its rival three times in the past decade, according to other people familiar with the situation.
Most of the negotiations between Neiman and its lenders and creditors have so far focused on shedding debt, and exiting bankruptcy court with most of its stores intact, some of the people said.
Because of the coronavirus pandemic, Neiman closed its stores in March and furloughed many of its 14,000 workers, while reducing hours and pay for the rest.
Even before the virus shut many U.S. stores, department stores were struggling from increased competition from upstarts as well as the brands they sell, which have opened their own stores and websites. Even wealthy shoppers are scouring the internet for deals as they purchase more online.
Barneys New York was sold to a licensing company after it filed for bankruptcy last year, and its brand lives on in boutiques at Saks. J.C. Penney Co. missed a debt payment last week, throwing its future in doubt. Sears Holdings Corp. has closed most of its stores after filing for bankruptcy protection in 2018.
In addition to its 43 namesake stores, Neiman operates two Bergdorf Goodman stores in New York City and 22 Last Call discount locations. Earlier this year, the company said it was closing most of its Last Call stores.
A bankruptcy filing for Neiman would mark a blow for private-equity firm Ares Management Corp. and the Canada Pension Plan Investment Board, which bought Neiman Marcus in 2013 for $6 billion, including debt. The previous owners were private-equity firms TPG and Warburg Pincus LLC, which paid about $5.1 billion for the company in 2005.Neiman was on the brink of embarking on a restructuring of its debt before it closed its stores in the initial wave of the coronavirus pandemic. Neiman has $120 million in interest payments due in April, including those that it missed last week.