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Neiman Marcus High Yield Bonds Slump in Trading Amid Retail Pressure

Neiman Marcus 8% cash-pay notes due 2021 slumped 5.25 points to a new all-time low on Monday, breaking through 60 for the first time as the issuer continues to come under heavy scrutiny amid pressure across the brick-and-mortar retail sector.

The majority of the sell-off was driven by short sellers, with some lightening up of positions reported by investors looking for a better entry point following the recent string of disappointing earnings out of the sector. “They don’t believe it’s a restructuring name, they are just leaning on it because they can and because the cost of carry is just too high,” said one source.

The 8.75% senior PIK-toggle notes lost three points, to 55. Those bonds were issued in 2013 to finance a buyout by Ares Management and the Canada Pension Plan Investment Board.

Further up the capital structure, Neiman Marcus’ TLB (L+325, 1% LIBOR floor) was quoted at 81.25/82.25, down about a point from the last session, sources said. Before the last few weeks, the last time the term debt fell to the low 80s was in early 2016, when the once luxury retailer in January shelved its IPO plans after it reported in December its fifth straight quarter of declining sales and a 25% drop in EBITDA. December’s drop in EBITDA followed a 40% EBITDA decline in its September quarter.

In addition to the string of poor earnings from retailers fueling expectations that Neiman Marcus’ numbers will be weak when it reports in the second week of March, sources also point to weak foot traffic and post-election traffic disruption on Fifth Avenue in New York potentially impacting Neiman Marcus’ Bergdorf Goodman store.

Furthermore, investors are reportedly concerned about the company’s inventory levels, particularly in light of the company’s operational challenges related to the launch of its new common merchandising system, NMG1.

Dallas, Texas–based Neiman Marcus Group, Inc., through its subsidiaries, operates as an omni-channel luxury fashion retailer primarily in the United States. As of Oct. 29, the retailer’s long-term debt totaled $4.77 billion, according to SEC filings. The company is rated B–/B3 with negative outlook on both sides. — Rachelle Kakouris/Kelsey Butler

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