Marble Ridge Capital LP, a value-oriented distressed debt investment firm, today reported it has sent a letter to the Board of Directors of the Neiman Marcus Group Ltd LLC expressing concern that the company may be in default under its Indentures. Marble Ridge is a holder of Neiman Marcus 8.75% Senior Notes and Term Loans.
Among several improper transactions cited in its letter, Marble Ridge highlights the recent transfer of the MyTheresa business without any consideration to Neiman Marcus Group, Inc., which is jointly owned by Ares Management ("Ares") and Canada Pension Plan Investment Board ("CPPIB"). Neiman Marcus Group, Inc. is not an issuer, borrower, or guarantor under the debt documents. As stated in the letter:
"…what these transactions appear to be is an attempt to move the MyTheresa business beyond the reach of existing creditors sitting between the sponsors' equity and the valuable MyTheresa assets. Most troubling, we understand that Ares and CPPIB usurped this massive benefit and took the MyTheresa business for no consideration."
The letter goes on to state:
"Marble Ridge has reason to believe that the Company was insolvent at the time of the Transactions or was rendered insolvent thereby. The Company is the issuer and/or guarantor of at least $4.7 billion of indebtedness. Based on LTM EBITDA of $478.2 million, the Company's indebtedness prior to the Transactions implies nearly a 10x leverage multiple (far in excess of any of its peers). Moreover, a dividend or other form of a spinoff by an insolvent guarantor to its equity sponsors, for no consideration, has all the hallmarks of an intentional or constructive fraudulent transfer (or illegal dividend) and raises serious questions of breaches of duties of care and loyalty, with exposure for Ares and CPPIB, as controlling shareholders, and for the Company's board. As noted above, Marble Ridge also has concerns that the Transactions do not comply with the Indentures."
Dan Kamensky, Managing Partner of Marble Ridge, commented, "It is clear that CPPIB and Ares are looking to line their own pockets at the expense of the Company's other stakeholders and employees. With management serving at their behest, these recent actions threaten the viability of a storied franchise that includes marquee brands such as Neiman Marcus and Bergdorf Goodman. Rather than allowing the theft of assets by CPPIB and Ares, we believe a more responsible Board, given its fiduciary obligations, would have engaged in a strategic review to maximize value for the benefit of all of the Company's stakeholders. The potential sale of MyTheresa and the premier real estate owned by Neiman Marcus would generate billions of dollars in proceeds that could be used to substantially reduce the Company's indebtedness and put the Company on more solid financial footing, enabling it to invest in and grow its core business."
In its letter, Marble Ridge asked the Company to provide information in order to assess whether the transactions complied with the Indentures as well as the Company's rationale for entering into the transactions.
About Marble Ridge Capital LP
The principal objective of Marble Ridge is to achieve superior risk-adjusted returns throughout market cycles by making opportunistic investments across and throughout the capital structure of companies that are expected to undergo some sort of corporate event or restructuring. Marble Ridge is led by Managing Partner Dan Kamensky, who has over 19 years of industry experience. Prior to founding Marble Ridge, Mr. Kamensky was a Partner at Paulson & Co. Inc., where he initiated and executed some of the firm's most complex and profitable distressed and event-driven investments across the capital structure.
