Bankrupt Neiman Marcus is moving closer to an exit from bankruptcy proceedings, but first it gets to pay up to $10 million in bonuses to its top executives.
The debt-laden luxury retailer earlier this month sought permission to pay as much as $6 million to CEO Geoffroy van Raemdonck as part of a “Key Employee Incentive Plan.” Chief merchandising officer Svetlana Todorovich and chief operating officer Chris Sim are also on the bonus list. Separately, the Texas-based company also earmarked up to $8.7 million for senior managers at the director, vice president and senior vice president levels. Federal Bankruptcy Judge David Jones granted the motion at a court hearing Thursday, despite objections from the U.S. Trustee in the case. Judge Jones noted that such bonuses are customary for companies in bankruptcy who are seeking to emerge from Chapter 11, and that paying to retain top talent helps them do that.
Thursday’s hearing also saw the court approve the company’s disclosure statement, paving the way for Neiman to begin soliciting approval of the plan from creditors. A confirmation hearing on the retailer’s reorganization plan is set for Sept. 4.
A proposed settlement between parties in connection with the battle over the MyTheresa e-commerce operation has helped to move things along. The crux of creditors’ discontent was the transfer of the operation to a separate entity controlled by Neiman’s private equity owners, its leveraged buyout sponsors Ares Management and the Canada Pension Plan Investment Board. The two acquired Neiman in 2013 for $6 billion. Creditors hired a valuation expert who pegged the MyTheresa asset as being worth nearly $900 million just before Neiman filed its Chapter 11 petition.
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Some debt holders, including Marble Ridge Capital, had been contesting the transfer and Marble Ridge even went so far as to file a lawsuit in a Manhattan state court two years ago. Those contesting the transfer have viewed it as a fraudulent conveyance that sheltered a key asset from creditor claims.
While the nitty, gritty details of certain settlement terms are still being ironed out, the plan right now is to add at least $10 million to the pot to help satisfy unsecured creditor claims, as well as millions of shares of Series B preferred stock in MyTheresa valued at up to $175 million, also for distribution to unsecured creditors. When funds are available in a debtor’s estate, the satisfaction of claims by unsecured creditors are typically distributed on a pro rated basis. Even with the transfer of shares, Ares and the Canadian pension fun would retain control over the MyTheresa asset. The final terms of the settlement still require bankruptcy court approval.