%1

A Texas oil boom turned a single Neiman Marcus department store in downtown Dallas into one of America’s biggest luxury retailers. A century later, the new coronavirus tipped the heavily indebted company into a bankruptcy court, WSJ Pro Bankruptcy reported. Neiman Marcus Group Inc. yesterday filed for chapter 11 bankruptcy protection in Texas, becoming the latest large retailer to seek a court restructuring during the pandemic that has closed much of the U.S. economy. “We had a business that was on track prior to Covid-19,” Neiman Marcus Chief Executive Geoffroy van Raemdonck said in an interview. “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.” Other retailers that were struggling before state and local government mandates on social distancing forced businesses to close their doors are teetering, too. Neiman’s bankruptcy filing, in the Southern District of Texas, Houston Division, seeks to eliminate $4 billion of roughly $5.1 billion in debt. The creditors will become majority owners of the retailer, which has been controlled by private-equity firms. Neiman isn’t planning mass store closings or asset sales as part of the restructuring. Neiman has secured $675 million debtor-in-possession financing from creditors holding over two-thirds of the company’s debt. The creditors have also committed to $750 million in exit financing that would refinance the DIP and provide additional funding for the business.

J.C. Penney Co. did not make an interest payment due yesterday, another sign the company could be headed for bankruptcy, Bloomberg News reported. The retailer said in a filing that it wouldn’t make a $17 million payment due on a term loan, triggering a five-day grace period. The company said that it is evaluating strategic alternatives. It is the second debt payment J.C. Penney has skipped in the past month. The retailer has been searching for assets to back a loan that would finance a potential bankruptcy. The grace period on the previous missed payment runs out on May 15.

Hertz Global Holdings Inc.’s creditors were offered two tough choices when hammering out a deal to keep it out of bankruptcy: cut the 102-year-old company some slack and hope it recovers, or let it slip into insolvency and try to recoup their investment in sales of its devalued rental fleet, Bloomberg News reported. The holders of Hertz’s asset-backed securities blinked and gave the company until May 22 to pay them about $400 million. Hertz knew its creditors would want to avoid bankruptcy, which could trigger a fire sale of devalued used cars if the ABS trusts that hold the vehicles have to liquidate. That sets up a parallel quandary for Hertz’s bank lenders, which kept fighting after the ABS holders had agreed to a forbearance. In the next two weeks, Hertz’s banks — led by Deutsche Bank AG and Barclays Plc — must decide whether to allow Hertz to raise more money to pay the ABS holders, or let it slide into bankruptcy. The possibility of a future bankruptcy filing is still on the table, according to sources. Rental-car companies in bankruptcy typically look to unwind their ABS by selling down the fleet that backs the bonds. The coronavirus pandemic that has squeezed Hertz’s finances, though, has also sent resale values for those vehicles plunging.

Footwear retailer Aldo Group Inc. began a court restructuring process yesterday after the pandemic shuttered stores and worsened the company’s already-struggling business, Bloomberg News reported. The Montreal-based company operates about 3,000 stores and employs 8,000 people worldwide. It requested court protection through the Companies’ Creditors Arrangement Act in Canada, is seeking similar protection in the U.S. and is about to do the same in Switzerland, Aldo said in a statement. Ernst & Young Inc. was appointed as the monitor in the Canadian proceedings. “The impact of the Covid-19 pandemic has put too much pressure on our business and our cash flows,” Chief Executive Officer David Bensadoun said in the statement. “After conducting an exhaustive review of strategic alternatives, we determined that filing under CCAA and related proceedings is in Aldo’s best interest to preserve the company for the long term and survive through this challenging period.” The retailer expects to carry on business while it develops and implements a restructuring plan across the organization, Bensadoun said. Aldo’s pre-petition debt includes a C$300 million ($214 million) revolving loan arranged by Bank of Montreal that matures in October 2022. Aldo has struggled in recent years to maintain relevance in a world of increasing acceptance of casual footwear. Bensadoun said in a 2018 interview that the company was competing with makers of athletic wear as more workplaces embrace casual attire.

John Varvatos Enterprises Inc., a men’s fashion brand favored by rock stars and celebrities such as Dave Matthews and Ben Affleck, sought bankruptcy protection from creditors as the fallout from the Covid-19 pandemic derailed a corporate comeback effort, Bloomberg News reported. The New York-based company filed for chapter 11 as part of a plan to sell itself for an undisclosed amount to an affiliate of Lion Capital LLC, one of its creditors. Varvatos yesterday listed more than $140 million of debt in court filings in Delaware. In 2017, Varvatos sought to sell the chain to Authentic Brands Group — which owns Frederick’s of Hollywood — but Lion Capital, the company’s controlling investor, nixed the deal, according to the New York Post. Things got worse three years later when Nordstrom Inc. yanked some of Varvatos’s brands from its stores, resulting in a $2.6 million gross profit decline from 2018 to 2019. The company launched an internal reorganization, bringing in new management and pushing landlords to cut lease payments.

Tuesday Morning Corp., the discount home-goods retailer, is discussing a potential bankruptcy filing after the pandemic shut down its stores, Bloomberg News reported. No formal decisions have been made, but Tuesday Morning has held initial talks with lenders about a bankruptcy loan that would keep the company running while it works out a recovery plan. The situation remains fluid and plans could change, with the company still seeking alternative forms of financing. The outcome could depend on market conditions and the outlook for when stores could re-open. Founded in 1974, Tuesday Morning is a national off-price retailer that specializes in home products, textiles, furnishings and other home goods. It has about 700 stores in 39 states, according to its website. Tuesday Morning temporarily closed its stores in response to the pandemic in March. Like other retailers, the company is bracing for a slump tied to the closures, but it’s especially vulnerable because all of its sales come at its stores; there’s no online outlet. It drew $55 million from its revolving credit facility as a precautionary measure to ride out the pandemic.

Venerable U.S. retailer Lord & Taylor plans to liquidate inventory in its 38 department stores once restrictions to curb the spread of coronavirus are lifted as it braces for a bankruptcy process from which it does not expect to emerge, Reuters reported. Lord & Taylor’s preparations to liquidate its inventory as soon as its stores reopen offer a window into the grim future of a high-profile retailer — a storied department store chain founded in 1826 and billed as the oldest in the United States — that does not expect to survive the pandemic’s economic fallout. Retailers that pursue a liquidation hold “going out of business” sales in order to generate cash, and their stores often become magnets for consumers looking for bargains. Lord & Taylor is holding off on a bankruptcy filing and subsequent liquidation until it can reopen its stores to attract those shoppers.

A bankruptcy judge gave J.Crew Group Inc. permission to borrow more than $100 million under a chapter 11 loan provided by a group of creditors led by hedge fund Anchorage Capital Group LLC, WSJ Pro Bankruptcy reported. Bankruptcy Judge Keith Phillips overruled objections from a rival J.Crew lender to fees the Anchorage-led group is charging for providing a loan of up to $400 million to carry the retailer through its planned restructuring. The clothing retailer plans to draw on another $145 million of the bankruptcy loan in July and will have access to a further $110 million after July if lenders agree, according to J.Crew’s court filings. J.Crew filed for chapter 11 protection on Monday with a proposed deal in hand with the Anchorage-led group to swap more than $1.6 billion in debt for all of the reorganized company’s equity. Lenders and bondholders led by Anchorage also agreed to fund the company’s operations while under chapter 11 protection and to convert the bankruptcy financing to an exit loan when the company emerges from bankruptcy.

Bankrupt casual-dining company CraftWorks Holdings Inc. is willing to sell itself to Fortress Investment Group LLC for $45 million less than the buyer offered earlier, while aiming to reopen as many as 200 restaurants once pandemic restrictions are loosened, the Wall Street Journal reported. The company behind the Logan’s Roadhouse and Gordon Biersch restaurant chains on Monday floated a private sale to Fortress valued at $93 million. The offer is in the form of a credit bid, meaning Fortress wants to buy the company in exchange for canceling some of its debt. The sale proposal, which also includes the assumption of liabilities by Fortress, is subject to the bankruptcy court’s approval and higher offers. Vineet Batra, the investment banker to Craftworks, said in court documents it is unlikely another buyer would top the Fortress offer in light of the Covid-19 pandemic and its impact on the national economy. Fortress had offered $138 million for CraftWorks when the restaurant operator filed for chapter 11 bankruptcy in early March. CraftWorks filed for bankruptcy operating 338 locations under brands including Old Chicago, Rock Bottom, Big River Grille, the ChopHouse and A1A Ale Works.

Citing ongoing industry shifts and COVID-19's impact on the lending market, Rubie's Costume Co. Inc. has sought chapter 11 protection, Newsday reported. Rubie's and five affiliated companies on April 30 requested that the court consider their bankruptcy requests as one and allow the group time to pursue a replacement package for about $49 million in outstanding credit, according to court filings. The business, with corporate headquarters in Westbury, N.J., and sales headquarters in Melville, N.J., estimated it could secure a new credit arrangement within 90 to 120 days, but said it may pursue a sale if proposals did not emerge. Rubie's requested immediate access to $7.7 million in investment accounts, arguing the liquidity is needed to facilitate the restructuring and to function as it gears up for the lucrative Halloween season.