Neiman Marcus the luxury fashion retailer said Tuesday it was exploring its options, which includes changes to capital structure or a possible sale, as it looks for relief from growing debt amidst renewed interest of a buyout from Hudson’s Bay Company.
This announcement follows a report earlier in March that the company turned to an investment bank to explore the ways it could strengthen its balance sheet.
Neiman Marcus has liabilities that total over $6.4 billion, which include $1.2 billion in deferred taxes.
Hudson’s Bay, the owner of Saks Fifth Avenue and Lord & Taylor retail chains, currently is holding exploratory talks with Neiman Marcus over an acquisition, said people close to the matter. It considered acquiring Neiman Marcus most recently in 2013.
Interest from Hudson’s Bay comes as today’s retail industry is facing big headwinds that dented the sales of the company and made it hard to line up any equity financing for its bid for Macy’s Inc., said sources close to the company.
With bonds for Neiman Marcus trading at only half their par value, a company sale would likely need to receive the acceptance of creditors taking a loss, making it challenging to complete an acquisition, especially for Hudson’s Bay, a company with a $1.6 billion market capitalization and debt of more than $4.5 billion.
Neiman Marcus, Macy’s Hudson’s Bay have been under pressure to give discounts as a way to entice shoppers who more and more prefer the convenience and prices of internet retailers.
Neiman Marcus’, based in Dallas, problems have been increased as the affluent population in Texas has cut back spending due to a drop in oil prices, while the U.S. dollar remaining strong has kept spending by foreign tourists lower in places such as New York City.
On Tuesday, a national newspaper reported that Hudson’s Bay has been seeking a deal in which it would gain control of Neiman Marcus without the need to assume the retailer’s debt load.
Neiman Marcus said as well that it has made corporate structure changes including naming its online subsidiary store “My Theresa” as well as some properties in Texas and Virginia as unrestricted which means they are not subject to the same rules under other credit agreements of some other units in company.
However, experts have said the move was aimed at helping it better manage debt liabilities.