Neiman Marcus' $1.975 billion term loan "B" broke in the secondary, trading at 101, then dropped slightly to 100 3/4. A couple of hundred million dollars of the bank debt traded after it broke. One trader said there is plenty of support for the deal at par, but it is hard to tell how the price of the bank debt will develop because of its sheer size. "It will take time for it to get absorbed," he said.
Some players are skeptical about the performance of the company's bank debt because of volatile market conditions in the high-end retail segment. "I don't find it an attractive sector. It is not a safe place to be," said the trader. Standard & Poor's lowered its corporate credit rating on the Neiman Marcus Group to B+ from BBB preceding the $5.1 billion leveraged buyout of the firm by Texas Pacific Group and Warburg Pincus. The downgrade reflects the big increase in the company's debt because of the financing. Its total debt will swell to $3.3 billion from $250 million and its debt to EBITDA will be 6.5 times, according the rating agency.
Standard & Poor's assigned a B+ rating to the term loan. The rating on its $125 million 7.125% senior notes due 2028 was lowered to B+ from BBB. These notes, which had been unsecured, will become secured when the deal is completed and will have the same first-priority lien on property, plant and equipment as the term loan.
Standard & Poor's is more upbeat about Neiman Marcus' performance. In a press release it said the company is well positioned in the upscale retail sector and should be able to weather periodic downturns without seriously diminishing its competitive position.