(Bloomberg) -- Neiman Marcus Group Ltd. missed a payment on some of its bonds, according to a letter from Marble Ridge Capital LP, raising the possibility that the luxury retailer is spiraling into default.
In a letter to the Neiman Marcus board, Marble Ridge said the department store chain was already in default on its debt, after failing to pay interest on its 2021 notes that the investment firm owns. The missed payment triggers a 30-day grace period before a formal event of default takes effect. The omission amounts to $5.7 million, according to a Marble Ridge representative.
The coronavirus shutdown has hit hard at department stores, which were already under pressure from online competition and falling mall traffic before the pandemic shut off most of their revenue.
Neiman Marcus's apparent decision to withhold the bond payment comes after Bloomberg reported it was considering filing for bankruptcy. Earlier this week, J.C. Penney Co. also skipped an interest payment and huddled with advisers, with bankruptcy among the options under discussion.
Dallas-based Neiman Marcus declined to comment. The missed payment was reported earlier by Reuters.
In the letter signed by Managing Partner Daniel Kamensky, Marble Ridge renewed its complaint that Neiman Marcus took advantage of creditors with an asset shuffle that weakened their claim on the fast-growing online MyTheresa unit.
“By enabling and allowing the improper transfer of the company's crown-jewel, billion-dollar MyTheresa asset to the out-of-money sponsors for no consideration, you have left a carcass of a company for the remaining stakeholders and have put both Neiman's storied franchise and thousands of jobs at risk,” Kamensky wrote.
Going bankrupt and trying to reorganize during a quarantine could be disastrous for retailers, with stores shuttered and revenue slowed to a trickle. Creditors who ordinarily might push for liquidation to boost their recoveries may balk under the current circumstances, because it's impossible to hold going-out-of-business sales if the chain is shut down.
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