Restructuring at Neiman Marcus Group (A)

By Mike Harmon, Claudia Robles-Garcia
2020 | Case No. F317A | Length 19 pgs.
This case explores the use of advanced out-of-court restructuring techniques from the perspective of a company facing looming debt maturities and an overleveraged capital structure. The decade that followed the global financial crisis was characterized by rising corporate leverage with increasingly forgiving debt covenant packages. These looser covenants enabled borrowers to pursue a range of novel transactions to avoid bankruptcy. The 2016 exchange offer conducted by J.Crew paved the way for the use of a particularly aggressive form of restructuring, where valuable assets that had provided collateral and/or value support for loans and bonds are separated from the company and used as a bargaining chip to obtain more favorable terms in a restructuring negotiation. The protagonist in the case is a restructuring advisor, contemplating the proposal of a similar type of transaction for Neiman Marcus Group. These transactions have significant financial, strategic, commercial, legal and ethical implications, which the case explores in depth.

Learning Objective

This case is designed to help students understand complex out-of-court restructuring transactions in the context of the modern world, where liberal debt documentation has opened the door to more aggressive solutions. Students will learn about the business aspects of credit agreements and bond indentures, and how they can be “weaponized” in restructuring transactions. Students will also address the complexities of multi-party negotiations. Finally, students will explore the strategic, commercial, legal, and ethical considerations that are associated with such solutions.
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