Neiman Marcus committee expert disputes company, MyTheresa valuations

By Caroline Salls

Pittsburgh, July 28 – Neiman Marcus Group Ltd. LLC’s value was “significantly overstated” in two valuation reports, according to an expert report from the Michel-Shaked Group that was requested by the official committee of unsecured creditors appointed for Neiman Marcus’s Chapter 11 cases.

The report that was unsealed and filed with the U.S. Bankruptcy Court for the Southern District of Texas indicated that the company’s MyTheresa businesses’ value was significantly understated.

Michel-Shaked said it was hired by committee counsel Pachulski Stang Ziehl & Jones LLP to determine whether Neiman Marcus was solvent on March 17, 2014, the date it publicly announced that it had designated the MyTheresa businesses as unrestricted subsidiaries.

In addition, Michel-Shaked was asked to determine whether Neiman Marcus was solvent before and after the distribution of the MyTheresa businesses to ultimate parent Neiman Marcus Group, Inc. and to determine whether Neiman Marcus remained insolvent from the distribution date through its bankruptcy filing on May 7.

The report said Michel-Shaked was also asked to determine the value of MyTheresa on the designation and distribution dates, as well as on the date Neiman Marcus filed bankruptcy and the expected emergence date of Sept. 1.

Finally, Michel-Shaked said it was asked to comment on a Sept. 14, 2018 memorandum issued by Neiman Marcus chief financial officer Adam Orvos stating that the fair value of the company’s assets following the distribution was $7.029 billion and exceeded its debt by $328 million, comment on a March 10, 2017 Duff & Phelps report on the fair market value of MyTheresa and comment on Duff & Phelps’ April 30, 2018 report on the fair market value of Neiman Marcus, on which Orvos based his solvency memorandum.

In its report, Michel-Shaked said it believes that Neiman Marcus was insolvent following the designation before and after the distribution date and remained insolvent when it filed bankruptcy.

Michel-Shaked valued MyTheresa’s equity at $675 million as of March 14, 2017, at $822 million on April 30, 2018 and at $976 million on May 7. MyTheresa’s equity value as of Sept. 1 is expected to be $925 million, the report said.

Michel-Shaked also said Orvos’ opinion of the fair market value of Neiman Marcus’s assets after the distribution was “flawed, incorrect, and significantly overstates the fair market value.”

In response to Duff & Phelps’ findings, Michel-Shaked said the fair market value of MyTheresa as of March 10, 2017 “is flawed, incorrect, and is based on unreasonable assumptions which result in the value of MyTheresa being significantly understated.”

Meanwhile, Michel-Shaked said Duff & Phelps’ determination of Neiman Marcus’s fair market value as of April 30, 2018 was based on unreasonable assumptions that resulted in a significant overstatement.

Neiman Marcus is a Dallas-based department store and catalog retailer. The company filed bankruptcy on May 7 under Chapter 11 case number 20-32519.

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