NEIMAN MARCUS’ REGENOTIATES DEBT

Neiman Marcus, battered by a collapse in luxury spending, is angling to renegotiate a $600 million credit line that matures next fall, said two sources close to the situation.

As uncertainty mounts over sales of Gucci bags and Brioni suits, the retailer is trying to get a deal done sooner rather than later.

In recent weeks, rumors have flown in retailing circles that Neiman, which locally owns Bergdorf Goodman, might file for bankruptcy.

“Word is that TPG has lost patience,” said one apparel executive, referring to TPG Capital, which along with Warburg Pincus led a $5 billion leveraged buyout of the business in 2005.

When TPG and Warburg Pincus led the LBO of Neiman four years ago, they got borrower-friendly conditions in their loan agreements.

However, Neiman, whose sales fell 24 percent in April compared with a year earlier, has a $600 million asset-based revolving credit facility that matures in October 2010.

A source said the company is having difficulty getting that facility refinanced.

Deutsche Bank was the administrative and collateral agent on the revolving credit facility.

Sources said Neiman is talking to several banks about replacing the credit facility, and banking sources stressed that even though conversations are taking place between Neiman and other banks, the retailer isn’t on the verge of filing for bankruptcy.

Nevertheless, the retailer has been hit particularly hard by the economic slump, as even rich people pull back on their spending on big-ticket items. Retailers like Neiman, Saks and Barneys New York have responded by slashing prices to move merchandise, but that has only served to put them further back on their heels by eating into the bottom line.

A refinancing, according to two sources, could include getting a new secured loan. One source said Neiman would use the proceeds to pay bondholders at a big discount to par.

The bondholders already have taken a big hit. In April, Neiman Marcus announced it may defer paying interest to its bondholders and instead pay preferred-in-kind notes that mature in 2015.

KDP Investment Advisors analyst Bob Veno projects Neiman will generate $235 million in cash flow for the 12 months ending Aug. 31.

Neiman has $3 billion in debt, $1.2 billion of which is unsecured, giving it a very high debt-to-cash flow multiple of 13 times, and making it unlikely the firm will come close to being able to pay the bonds in six years.

Veno said he would be wary of investing in unsecured Neiman debt until there are signs the retailer has turned the corner. With Mark DeCambre