NEW YORK, March 1, 2019 /PRNewswire/ -- Marble Ridge Capital LP today reported that it has sent the following letter to the Board of Directors of the Neiman Marcus Group Ltd LLC in response to Neiman's announcement of a "Final Company Proposal."
March 1, 2019
RE: "Final Company Proposal"
Dear Members of the Board of Directors,
Neiman Marcus' announcement today of a so-called "Final Company Proposal" that has the purported support of a sub-set of bondholders merely seeks to pressure creditors to forgive the misconduct of the Board and turn a blind-eye to the Sponsors' self-enrichment scheme. As must be obvious to all concerned, this so-called "Proposal" does not have and we believe will not obtain the approval necessary to make it effective.
Your continued attempts to co-opt certain creditors will not insulate yourselves from liability and does nothing to change the wrongdoing charged in the Amended Petition filed against Neiman Marcus and the related entities in the District Court of Dallas County, Texas, that the Neiman Defendants have engaged in gross misconduct including an improper transfer of assets of approximately $1 billion of value, intentionally stripping these assets away from creditors for no consideration.
You, as Board members, surely must know that continuing to use your position to disadvantage creditors in favor of the out-of-the-money Sponsors has all of the hallmarks of a scheme to loot Neiman Marcus of valuable assets and, in doing so, to hinder, delay and defraud creditors of Neiman Marcus Group Ltd LLC.
Your "Proposal's" request for bondholders to waive their claims against you and the Sponsors arising out of your misconduct is nothing more than a transparent attempt to insulate yourselves from liability.
We are confident that discovery will confirm, among other key facts:
- On March 10, 2017, the Company announced the first step of its Scheme to loot assets by unilaterally removing certain controlled subsidiaries from the restrictions placed on the Company by its creditors.
- On September 18, 2018, the Company announced the second step of its Scheme – distributing the MyTheresa assets to Parent for no consideration whatsoever.
- The Company announced today a third step in the Scheme – a "Proposal" to have the Sponsors retain 50% of the equity value of the MyTheresa assets together with $250 million of 10% Cumulative Preferred Equity for no consideration, representing several hundred million dollars of value stripped from creditors in order to benefit the out-of-money Sponsors.
- At all times, this multi-step Scheme has been concocted against the backdrop of the Company's insolvency and in order to serve the interests of the Sponsors.
- The Scheme has been enabled through a self-serving, so-called corporate governance structure of Parent, Holdings and the Company engineered to avoid liability for breach of fiduciary duties.
- At the same time, this superficial corporate governance structure has been exacerbated by the role of the conflicted legal professionals, whom have stood on the opposite side of each transaction through their simultaneous representation of both the Parent and its insolvent subsidiary.
As we have communicated to you, 100% of the valuable MyTheresa assets must be returned to the Company and the pervasive conflicts of interest that enabled these valuable assets to be improperly stripped for no consideration must be resolved by appointing a separate and independent governing body that is capable of making independent decisions affecting the insolvent subsidiary, as such body's applicable legal duties require.
We have made clear our view to you that as Board Members you have acted in wanton disregard of your duties to creditors while the Company has been or was rendered insolvent thereby, and no "whitewashing" of the Scheme will insulate you from liability. Your machinations to cajole creditors into acceding to your demands will not survive further scrutiny. You have every reason to recognize that a neutral third party, whether appointed by a single creditor or by an estate representative, will seek to undo your self-serving transactions for the benefit of all unsecured creditors.
In the meantime, we will not stand idly by and allow you, as Board Members, and your conflicted counsel, to put at risk Neiman's storied franchise and the thousands of jobs that hang in the balance.
We plan to speak with other bondholders in the coming days about our concerns to seek to ensure a fair and just result is achieved for all stakeholders.
We will continue to take all necessary actions to protect our rights, all of which are expressly preserved.
MARBLE RIDGE CAPITAL
Robert Siegfried / Cathryn Vaulman
SOURCE Marble Ridge Capital LP