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Neiman Marcus files for bankruptcy
81–90 of 276 posts
Re: Neiman Marcus files for bankruptcy
#82Earlier quoted context omitted.
Can you explain how the creditors of 4bn in Neiman Marcus debt are making money off this?
Because they won’t default now.
Ok, a potential positive sum is definitely better than zero but once again, how exactly are creditors making money off this? The grandparent's post is implying that somehow no one is losing money in this situation. I'd like to hear how it works.
Re: Neiman Marcus files for bankruptcy
#83Earlier quoted context omitted.
Can you explain how the creditors of 4bn in Neiman Marcus debt are making money off this?
They probably sold the debt to another party
So you're saying that the original creditors made money off this and new creditors through secondary market transactions are left holding the bag? That's partially true but a massive portion of this debt is in pension funds or passive investments that track index funds. They track benchmark indices so they're buying these bonds at issue or shortly after. With no active management involved, they are also losing money when a company files.
Re: Neiman Marcus files for bankruptcy
#84Earlier quoted context omitted.
Private equity companies exist to purchase existing companies from their current owners and then run them better/extract more value from them. The canonical example of this is purchasing a public company by acquiring all outstanding shares. This is often a fantastically expensive enterprise that requires that the new owners raise tons of money. The new owners do this by structuring a deal where the company will take…
Thanks for that. But why is the company now worse off than before? A company can be funded with equity or debt (different terms and obligations, I understand) but if a company converts 100% of its outstanding shares to debt, why does anything change? I assume this is what happens when a company takes itself private to escape the grind of quarterly earning, short-term growth, tyranny of Wall Street analysts, etc. If I…
The company is now servicing $100m of debt. That cash went to the previous shareholders in the buyout.
Re: Neiman Marcus files for bankruptcy
#85One of Frederick Wiseman's wonderful documentaries is "The Store", which is about Neiman Marcus sometime in the 80's. Currently streaming on Kanopy.
One sequence showed the CEO giving a pep talk to his buyers, whose relationship with their suppliers was always strained at best. He told a joke about a buyer who called his supplier that went something like:
Buyer: "Hello, is Fred Jones there?"
Receptionist: "I'm sorry, Mr. Jones passed away last month"
Buyer: "Oh, sorry to hear that, goodbye."
Ten minutes later:
Buyer: "Hello, is Fred Jones there?"
Receptionist: "I told you, he died last month"
Buyer: "Oh, oh, yes. Goodbye."
Ten minutes later:
Buyer: "Hello, is Fred Jones there?"
Receptionist: "He's dead, why do you keep calling here?"
Buyer: "I just like hearing you say it"
Re: Neiman Marcus files for bankruptcy
#86Earlier quoted context omitted.
Same with J Crew.. real value creators these PE people are
PE does create value! They take over companies that are in a liquidity crisis. They bring buckets of cash with them that gets the company out of the liquidity crisis. Suddenly, the value of the company increases dramatically because creditors can't take advantage of it anymore. PE doesn't takeover companies they think can make it. Regular investors would do that. They take over companies that everyone knows are doome…
What's the value again?
They plump up the turkey, borrow against it, and spread the losses across the market.
The original lenders benefit as they offload poorly underwritten debt. The owners of the distressed asset benefit because they get something. The people orchestrating the turnaround win via fees, etc.
Re: Neiman Marcus files for bankruptcy
#87Earlier quoted context omitted.
Private equity companies exist to purchase existing companies from their current owners and then run them better/extract more value from them. The canonical example of this is purchasing a public company by acquiring all outstanding shares. This is often a fantastically expensive enterprise that requires that the new owners raise tons of money. The new owners do this by structuring a deal where the company will take…
Thanks for that. But why is the company now worse off than before? A company can be funded with equity or debt (different terms and obligations, I understand) but if a company converts 100% of its outstanding shares to debt, why does anything change? I assume this is what happens when a company takes itself private to escape the grind of quarterly earning, short-term growth, tyranny of Wall Street analysts, etc. If I…
> If I could run a company better/extract more value from it, say, by decreasing expense, increasing revenue, and therefore profits, I'd write myself a big check quarterly and continue running the company.
If you can. If you can't and your cash flow either stays flat or declines, you now have more debt to service. The more debt you have, the less leeway you have to execute on your plan. That's assuming you don't screw anything up in the business without considering any macroeconomic factors.
Re: Neiman Marcus files for bankruptcy
#88Earlier quoted context omitted.
Wow, why don't people wise up to this PE trick? Seems like creditors would learn their lesson after so many examples...
The "creditors" are usually another shell company of the PE firm, and the interest rates are absurd (I looked into the collapse of Maplin and it was something like 20%). It's basically an accounting trick to remove profits from the victim company in its declining years without having to pay tax on them.
How does a PE firm make money if a shell company of theirs is losing money while another arm of it makes money?
Also, if the only financing a business can access is basically consumer credit card rates, they probably weren't a going concern.
Re: Neiman Marcus files for bankruptcy
#89Earlier quoted context omitted.
Private equity companies exist to purchase existing companies from their current owners and then run them better/extract more value from them. The canonical example of this is purchasing a public company by acquiring all outstanding shares. This is often a fantastically expensive enterprise that requires that the new owners raise tons of money. The new owners do this by structuring a deal where the company will take…
Thanks for that. But why is the company now worse off than before? A company can be funded with equity or debt (different terms and obligations, I understand) but if a company converts 100% of its outstanding shares to debt, why does anything change? I assume this is what happens when a company takes itself private to escape the grind of quarterly earning, short-term growth, tyranny of Wall Street analysts, etc. If I…
Your theory is good, but is it what happens in practice? In the headlines, you will find examples of "corporate raiders" who bought the company to "extract value" which means doing pretty much what a leech does. Also most of these examples showcase that the company would have been better off without the private equity buyers. Could there be good buyers, sure.
Re: Neiman Marcus files for bankruptcy
#90“It’s Collapsing Violently”: Coronavirus Is Creating a Fast Fashion Nightmare https://www.gq.com/story/coronavirus-fast-fashion-dana-thoma...
Neiman Marcus is not fast fashion