Neiman Marcus files for bankruptcy • Hacker News Board

Re: Neiman Marcus files for bankruptcy

#131

Post by ghaff » Thu, May 07, 2020, 8:14 PM UTC

kevstev wrote: post #98

ghaff wrote: post #9

Earlier quoted context omitted.

Yeah. It's not just department stores--which I have less direct experience with. A lot of the old line "mail order" outfits like LL Bean, J Crew, Lands' End, etc. (as well as many of the at least semi-premium outdoor clothing/gear/etc. brands) are much more of a both quality and customer service crapshoot than they once were. At the risk of painting with an overly broad brush, when everything is made in the same, mos…

I ordered stuff from Banana Republic Factory about a year ago. I was on their email list, saw something I liked in the ad, clicked on it, bought it. It was on sale, a shirt for like $30. I had good experiences with stuff I bought from them in an actual store years prior. The shirt came, and it was synthetic blend of polyester IIRC- the shirt felt like wearing a garbage bag, but much worse was that the fabric was so t…

The original Banana Republic was sort of a fun, funky thing in the day of mail order catalogs. At some point, they morphed into something that always seemed pretty bland and generic. But I'm not surprised they may have gone downhill even further.

TBH, I buy very few clothes these days as I'm mostly either WFH or (normally) traveling--where I'm mostly a very light packer. I'm sure I have tons of perfectly clothes in my closets I haven't worn in years and that's with pruning.

Re: Neiman Marcus files for bankruptcy

#132

Post by N1H1L » Thu, May 07, 2020, 8:16 PM UTC

karatestomp wrote: post #4

bruceb wrote: post #2

I think even without Covid, its harder to tell what is luxury in apparel. There have been a couple articles on this. There used to be a clear difference between the look of clothes at different retailers but not as much anymore. Walk through Neiman Marcus, Nordstrom, Macy's, H&M, and they start to blend together. Doesnt mean no difference but maybe not enough to always charge a premium.

They all seem to have decided on a "market expansion at the expense of brand dilution" strategy. Ditto most of the formerly-consistently-good clothing brands. I'm not really sure which stores/brands replace the ones that have done this, these days. [EDIT] I suspect part of this is because the cost of actually-good clothes hasn't dropped like shitty-clothes costs have, because (this is further speculation on my part)…

Every shopping mall, even ones in the middle of nowhere in Bumfucktown has a Macy's and a Victoria's secret. None of those two companies look like they are on a sustainable trajectory.

Re: Neiman Marcus files for bankruptcy

#133

Post by pjc50 » Thu, May 07, 2020, 8:16 PM UTC

whatok wrote: post #88

pjc50 wrote: post #19

Earlier quoted context omitted.

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.

The Maplin explanation: http://www.coppolacomment.com/2018/03/the-sad-story-of-mapli...

> Further down the corporate structure, Maplin Electronics Group (Holdings) Ltd. mainly seems to exist to drain Maplin Electronics Ltd. of profits. On the books of Maplin Electronics Group (Holdings) Ltd. is an intercompany loan to Maplin Electronics Ltd. at an interest rate of 10%. The interest charge on this loan was sufficient to ensure that Maplin Electronics Ltd. made a statutory loss in both 2016 and 2017. Meanwhile, the direct owner of Maplin Electronics Ltd, Maplin Electronics (Holdings) Ltd., appears to exist only as a vehicle to hold a £31m revolving credit facility from Lloyds Bank. All of these intermediate companies are effectively guaranteed by MEL TopCo. All of them are now therefore insolvent.

> ... When Rutland Partners acquired Maplin in 2014 it funded the purchase with debt. That debt was loaded in its entirety on to the books of MEL Topco, in the form of £15m of bank loans at Libor + 7.5% and £72m of shareholders' loan notes at 15%.

Re: Neiman Marcus files for bankruptcy

#134

Post by pjc50 » Thu, May 07, 2020, 8:17 PM UTC

rwmj wrote: post #33

pjc50 wrote: post #19

Earlier quoted context omitted.

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.

I assume someone must lend the money (as it's not created from nothing). How does it work?

See my other comment below for Maplin explanation. It does appear that Lloyds bank lost money there.

Re: Neiman Marcus files for bankruptcy

#135

Post by hnmullany » Thu, May 07, 2020, 8:18 PM UTC

hnmullany wrote: post #129

pjc50 wrote: post #19

Earlier quoted context omitted.

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.

That's not correct - creditors are usually banks for secured term debt or bondholders. The interest rates are not absurd. In this case, the bondholders are suing the private equity fund for stripping the asset. The bond in question looks like it had about a 10% interest rate

The lead bondholder is Marble Ridge Capital - a fund that specializes in distressed asset investing.

Re: Neiman Marcus files for bankruptcy

#136

Post by selimthegrim » Thu, May 07, 2020, 8:18 PM UTC

greedo wrote: post #68

ghaff wrote: post #9

Earlier quoted context omitted.

Yeah. It's not just department stores--which I have less direct experience with. A lot of the old line "mail order" outfits like LL Bean, J Crew, Lands' End, etc. (as well as many of the at least semi-premium outdoor clothing/gear/etc. brands) are much more of a both quality and customer service crapshoot than they once were. At the risk of painting with an overly broad brush, when everything is made in the same, mos…

I used to be an Eddie Bauer guy. Shirts, shoes, shorts, jeans, coats, you name it. Spent a good chunk of change at their mall store where you could try stuff on. Overtime, the fabrics got thinner on shirts and jeans. They stopped stocking my size in store. Stuff started wearing out quicker. I tried to order online, but the order fulfillment was hit and miss. Too bad for them...

Ha did you have the Ford Explorer?

Re: Neiman Marcus files for bankruptcy

#137

Post by whatok » Thu, May 07, 2020, 8:22 PM UTC

pjc50 wrote: post #133

whatok wrote: post #88

Earlier quoted context omitted.

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.

The Maplin explanation: http://www.coppolacomment.com/2018/03/the-sad-story-of-mapli... > Further down the corporate structure, Maplin Electronics Group (Holdings) Ltd. mainly seems to exist to drain Maplin Electronics Ltd. of profits. On the books of Maplin Electronics Group (Holdings) Ltd. is an intercompany loan to Maplin Electronics Ltd. at an interest rate of 10%. The interest charge on this loan was sufficient…

None of those entities mentioned in there are creditors except Lloyds. Private equity deals sometimes have complex capital structures with absurd entity names but creating a "shell company" as described earlier doesn't allow you to get away with theft.

Re: Neiman Marcus files for bankruptcy

#138

Post by pjc50 » Thu, May 07, 2020, 8:22 PM UTC

devchix wrote: post #96

kshacker wrote: post #89

Earlier quoted context omitted.

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.

"extract value" -- what does this mean? Sell off the furniture? Fire 50% of the employees? I have image of Richard Gere saying "I buy companies that are in financial difficulties, I break it up into pieces, and I sell that off." Like stealing cars and selling them for parts, right?

Stealing cars is small-time. The big deal is to steal the car factory. Or, in the case of MG Rover, sell the land the factory is built on to a holding company and pay yourself a bonus.

(The collapse of MG Rover is complicated and the directors very narrowly avoided prosecution)

Re: Neiman Marcus files for bankruptcy

#139

Post by fakedang » Thu, May 07, 2020, 8:25 PM UTC

1-6 wrote: post #81

The definition of luxury has changed. It's now more about value, utility, and stability. Luxury means owning property in a high-end location, a MacBook Pro, fast optical networks, clean drinking water, and a reliable car.

MacBook Pros are luxury goods now? What someone, such as myself, doesn't really like them, and instead prefers Thinkpads, like most of my peers?

Re: Neiman Marcus files for bankruptcy

#140

Post by devchix » Thu, May 07, 2020, 8:26 PM UTC

topkai22 wrote: post #109

devchix wrote: post #79

Earlier quoted context omitted.

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…

Becuase the risk of investment is now structured differently with leverage. Let's pretend we live in world where companies are always worth 10x earnings + assets. Our pretend company $100M makes $5M in earnings and has $50M in assets (cash, real estate, etc..) To take the company private, the lenders require an interest of 10% and 10% principal Some PE company (or the CEO, whatever) thinks they can make this work, so…

Thank you, I understand better now with the numbers worked out. Although in this example, outcome is dependent on circumstance and LBOs are not covers for malfeasance the way they're frequently talked about.