Neiman Marcus is reportedly preparing to file for bankruptcy

The luxury retail chain’s bankruptcy-protection filing could come as soon as this week

Neiman Marcus is on the verge of bankruptcy.

Sources told Reuters that the Dallas-based luxury retail chain is preparing a bankruptcy-protection filing that could come as early as this week. The debt-laden company, which has already been struggling financially for years, has been pushed to the brink by the COVID-19 pandemic and could become the first major U.S. department store to succumb to the economic fallout from the global health crisis.

According to the New York Post, Neiman Marcus hired Berkeley Research Group and Boston Consulting Group to handle its bankruptcy filing. The latter is reportedly looking into three options: sell the business, shrink the chain by closing half of its stores and keep operating, or total liquidation.

In March, the pandemic forced the retailer to temporarily close all 43 of its Neiman Marcus locations, roughly two dozen Last Call stores, and its two Bergdorf Goodman stores in New York. The company also laid off several of its roughly 14,000 employees and skipped millions of dollars in debt payments earliest this month, including one that only gave it a few days to avoid a default, according to Reuters.

In order to sustain some of its operations during bankruptcy proceedings, Neiman Marcus is said to be in the final stages of negotiating a loan with its creditors totaling hundreds of millions of dollars. According to credit ratings firm Standard & Poor’s, the retailer is carrying nearly $4.8 billion in debt. A huge portion of this debt is the legacy of its $6 billion leveraged buyout in 2013 by its owners, private equity firm Ares Management Corp and Canada Pension Plan Investment Board.

READ  Starbucks' tie-dye frappucinos aren't caffeinated but they sure are beautiful

Sources told Reuters that once Neiman Marcus files for bankruptcy, the retailer could attract interest from potential suitors seeking to pick up the company or some of its assets at low costs.

To avoid Neiman Marcus’ fate, some department store operators like Macy’s and Nordstrom Inc are reportedly rushing to secure new financing. JC Penney Co, on the other hand, is reportedly considering filing for bankruptcy in order to update its unsustainable finances and save money on impending debt payments.