Investors challenge Neiman Marcus bankruptcy loan

Mudrick Capital Management LP and hedgefund Third Point LLC plan to challenge a 600 million dollar financing package that Neiman Marcus has arranged for its looming bankruptcy and push the department store chain to sell itself. Neiman Marcus is looking to seek bankruptcy in Dallas federal court today as its sales have come close to a halt with all of their brick-and-mortar stores closed and only e-commerce operating.

Mudrick submitted a 700 million dollar proposal for debtor in possession financing. Fir Tree partners is also expected to propose financing along with Third Point.

However, Neiman Marcus has plans to use a 600 million dollar loan it spent several weeks negotiating with creditors to help it sustain operations as the company continues to navigate bankruptcy proceedings. Neiman's current bankruptcy plan includes having creditors forgive most of its 5 billion dollar debt in exchange for taking control of the retailer.

A bankruptcy judge will have to approve any final bankruptcy proceedings, and the challenge to the 600 million dollar financing package comes from the investors who say their fees are less expensive. The highlight of the 700 million dollar package Mudrick submitted is that it will force Neiman Marcus to be put up for sale before bankruptcy can proceed. The investors expect Hudson's Bay Co., the owner of Saks Fifth Avenue, to put in an offer for Neiman Marcus. Hudson's Bay Co. has declined to comment on the matter.

The 700 million dollar proposal on the table does allot funds to pay back 100 million dollars to creditors, specifically those who hold Neiman Marcus inventory. The competing bids have both pros and cons on both sides, so ultimately the fate of Neiman Marcus lies in the hands of a bankruptcy court judge.

photo: courtesy of PR Newswire