A thriving market for IPOs is helping ease tensions between a pair of struggling retailers and their lenders, as Neiman Marcus Group Ltd. and PetSmart Inc. explore selling their e-commerce platforms, WSJ Pro Bankruptcy reported. In recent months, both retailers have resolved disputes with creditors in large part by promising to pay them with proceeds from initial public offerings or sales of their online businesses. The quarrels centered on the transfer of stakes in those businesses out of the reach of creditors and closer to their private-equity owners. Both cases show how the recent rush of IPOs is having unexpected consequences, giving hope to owners and creditors alike that they can salvage returns—or at least reduce losses—in troubled investments. They also prove that private-equity companies can claim valuable pieces of financially challenged businesses, something debt investors fear could become more common as the terms of debt agreements become more borrower-friendly. In the end, the owners of Neiman Marcus and PetSmart could strip assets from their properties because the terms of their debt allowed them to do so, “which is not something you’d see five years ago,” said John Dionne, a senior lecturer on private equity at the Harvard Business School.
