It’s the coronavirus outbreak’s latest – and perhaps its biggest – retail casualty.
Neiman Marcus is joining J Crew and JC Penney in restructuring as the department store – a class of retailer that has been particularly hard-hit by the outbreak – has reportedly reached a deal with its creditors for a loan to get it through bankruptcy.
With that, the troubled department store chain, which has been widely expected to file before mid-May, is set to file any day now, according to the report, which also claimed that PIMCO would act as the lead lender.
Of course, as we explained weeks ago, it’s hardly surprising that a store widely known by the nickname “Needless Markups” has finally buckled under its onerous debt burden.
And as we explained then, the biggest loser in all of this is America’s malls and – more importantly – the owners of the securities backed by the debt owed by said malls.
This confirms a recent report from Reuters according to which Neiman Marcus was preparing to file for bankruptcy. As Reuters adds, a Neiman bankruptcy filing would likely be contentious. A trustee for some of the company’s bondholders, including Marble Ridge, sued Neiman last year, claiming the company and its owners robbed investors of the value of luxury e-commerce site MyTheresa in the earlier debt restructuring. The biggest loser from this waterfall of default which will collapse all cash flow payments from these massive retail giants, is the mall sector, which as a reminder was the target of the “Big Short 2” via the CMBX Series 6 BBB- index, and which plunged in late March making all those – such as Carl Icahn 0 who had bet on the collapse of that icon of US life, malls, very rich…
… and in fact, unlike the broader market which has staged a remarkable rebound in recent weeks, the mall-heavy Series 6 CMBX tranche continues to slide, and was just shy of all time lows at last check, which is a vivid reminder of what price discovery looks like when there is no Fed backstop (for now Powell is not buying deeply impaired CMBX tranches; that may change soon).
And as we noted in the above quote, among securities backed by the debt of commercial real-estate, CMBX Series 6 BBB-, a security comprised of mostly mall debt, will likely fare the worst.