The lawsuit, filed in December, alleges the luxury retailer's owners fraudulently transferred its European subsidiary out of reach of creditors. Marble Ridge Capital, a Neiman Marcus debtholder, sued to reverse the transfer of the Munich-based MyTheresa e-commerce division, valued at $1 billion, to private equity owners Ares Management and the Canada Pension Plan Investment Board.
My oh MyTheresa
Marble Ridge said in its December filing stated that MyTheresa, an asset with a value of about $1 billion, was stripped from the company and transferred to benefit the retailer's private equity owners, Ares Management and the Canada Pension Plan Investment Board. The bondholder also said that Neiman Marcus was ‘insolvent.’ Ares and the pension fund paid $6 billion for Neiman Marcus in a 2013 leveraged buyout. That debt put the retailer a tight spot which lay it open to possible bankruptcy. Featuring in a two-hour hearing before district judge Tonya Parker were references to ‘magic wands’ and the ‘colossal failures’ of Enron and Bear Sterns regarding debts at Neiman Marcus totalling $5 billion. Neiman Marcus said it arranged a preliminary refinancing agreement with its lenders to includes a three-year extension of the maturity of its $2.95 billion loan from 2020 to 2023. It also pledged some of MyTheresa as collateral for new debt to be used to amend its term loan. The date for refinancing its $1.6 billion in notes was shifted from 2021 to 2024, likely to lead to higher interest payments, which already total $300 million a year.
No ’magic wand’
According to the Dallas Morning News, Neiman Marcus attorneys Mike Lynn and Jeff Zeiger argued that Marble Ridge didn't have jurisdiction to file the lawsuit because it wasn't the originator of the debt it holds. Mr Lynn cited legal cases dating back to the Enron scandal and Bear Sterns, saying litigation rights don't pass on to subsequent bondholders. Mr Zeiger told the judge, ‘the only contractual obligation in the agreement is with the lender,’ not Marble Ridge, and that couldn't be wiped out ‘with a magic wand.’ Marble Ridge attorney Joshua Hedrick retorted ‘the only magic here is trying to pull this off without impunity.. Mr Hedrick argued, ‘to put this in context, this is a $1 billion fraudulent transfer case.’