S&P Cuts Neiman Marcus' Credit Ratings Over Concerns About Debt Restructuring

S&P Global Ratings on Monday lowered the credit ratings on Neiman Marcus' nearly $5 billion in debt because it doesn't expect the retailer's creditors to receive what they were promised.The rating agency's downgrade, with a negative outlook, is a response to Neiman Marcus' disclosure Friday that it had reached a proposed debt restructuring with most of its lenders.Based on terms of the proposed restructuring, "a distressed exchange is a virtual certainty," S&P said, adding it will lower the rating to default once the company completes the proposed transaction. The deal would restructure the Dallas-based retailer's debt without filing for bankruptcy. "The fundamentals of our business remain strong and continue to improve," Neiman Marcus said in a statement, adding that rating changes are "standard" when companies are undergoing a debt restructuring "even as it makes significant progress toward a resolution with creditors."One of its debt holders, Marble Ridge Capital, called the proposed deal a "devil's bargain." It said the offer includes debt instruments that profit by betting against the company.As part of the offer, Neiman Marcus issues second- and third-lien notes, exchanges unsecured debt and receives a maturity date extension of three years on its $2.95 billion term loan due in October 2020.The restructuring includes paying down some of that term loan from second-lien notes. The proposal also grants part of its Munich-based MyTheresa e-commerce division as collateral.Neiman Marcus' debt stems from its $6 billion leveraged-buyout in 2013 by Ares Management and the Canada Pension Plan Investment Board.The rating change doesn't reflect what the restructured capital structure will look like once completed. At that point, S&P will rate the company's debt again.Marble Ridge filed a lawsuit against Neiman Marcus in Dallas County District Court asking the court to force the retailer to return MyTheresa, which was moved out-of-reach of lenders, back to the retailer. It also wants an independent governing body appointed to make decisions that won't have "the pervasive conflicts of interest that have enabled a massive stripping of assets."Neiman Marcus on Monday responded to Marble Ridge's claims. It called Marble Ridge "a small holder that clearly regrets it has refused the company's repeated invitations to join creditor groups that reached an agreement in principle.""Far from increasing default risk, this deal will help support the company's long-term success," the company said.Twitter: @MariaHalkias  Continue reading...

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