In a filing on Monday with the United States Bankruptcy Court for the Southern District of Texas in Houston, the retailer said that it did not breach the terms of Deutsche Bank AG’s $760 million debtor-in-possession financing fund.
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The bank on Friday indicated in a filing that Neiman Marcus’ borrowing base — which determines how much it can obtain based on the value of its inventory — is at a negative $11 million although the retailer reported it to be $39 million at the time of its bankruptcy filing.
However, in a response filing on Monday, Neiman Marcus wrote that it now has $100 million more cash on hand than it initially estimated when it filed Chapter 11 because it managed to sell more inventory than planned.
“One direct effect of these higher-than-projected sales is a decrease of the debtors’ [Neiman Marcus’] current inventory,” Neiman Marcus’ filing read, explaining that it will use the cash to “replace inventory levels to those required” under the loan. (Vendors that were “previously unwilling to ship goods” to the retailer, it wrote, have now “resumed sales and started replenishing” Neiman Marcus’ inventory.)
The company added, “To be clear, no breach has occurred.”
Deutsche Bank on Friday alleged that the bankrupt retailer overvalued the inventory backing its asset-based credit line. It further raised concerns about Neiman Marcus’ ability to restore the cash collateral reserve, which helps protect the bank and other lenders, which would jeopardize financing moving forward.
Following weeks of speculation, Neiman Marcus filed for bankruptcy in early May. The debt-saddled luxury chain announced that it had secured $675 million in financing from creditors to continue operations during Chapter 11 proceedings. It listed estimated assets of between $1 billion and $10 billion, versus estimated liabilities in the same range.
“Prior to COVID-19, Neiman Marcus Group was making solid progress on our journey to long-term profitable and sustainable growth,” Geoffroy van Raemdonck, chairman and CEO of The Neiman Marcus Group Inc., said in a statement at the time. “However, like most businesses today, we are facing unprecedented disruption caused by the COVID-19 pandemic, which has placed inexorable pressure on our business.”