Neiman Marcus inflated its company value by billions, according to creditors
31 Jul 2020
Neiman Marcus Group Ltd.’s creditors say the retailer inflated its own value by billions of dollars when it made the corporate transfer of its e-commerce site MyTheresa in 2018.
An inflated value of the business would undermine its debt, making any transfer of assets an improper transaction under U.S. law.
According to the Wall Street Journal a valuation expert, hired by creditors in the wake of its bankruptcy, concluded the ailing department store group was worth only 3.9 billion dollars as opposed to the 7 billion dollars it valued itself.
The Fashion Law reported “Neiman Marcus made a transfer its European e-commerce division, namely, MyTheresa, to an unrestricted subsidiary in 2017. The retailer then transferred ownership of Munich-based MyTheresa again in September 2018 – this time to Neiman Marcus Group Ltd.’s parent company, Neiman Marcus Group Inc. – allegedly in an attempt to shield the company’s assets from creditors.”
Neiman Marcus said in its court documents that it was paying its bills and was not insolvent. “There is also ample indirect evidence of fraudulent intent and multiple badges of fraud. In approving and effectuating the distribution, the [Neiman Marcus Group] Board was presented with various alternatives, including the option of paying fair value for the MyTheresa asset, but chose to upstream the asset for no consideration,” the Neiman Marcus creditors committee said in its report according to the Dallas News.
“The creditors of Neiman Marcus say the MyTheresa transfer was an ‘asset grab’ by Ares and the Canada Pension Plan Investment Board. The committee believes that creditors have legal claims to the MyTheresa asset in the Neiman Marcus bankruptcy case,” the Dallas News wrote.
Neiman Marcus filed for bankruptcy in May and said it expects to exit Chapter 11 by Christmas, despite controversies concerning its asset transfer of MyTheresa and increasing its executive pay.