The Real Deal New York

Nordstrom family struggles to keep company buyout deal together

Banks are wary they can’t sell debt before holiday sales season
October 06, 2017 11:30AM

Rendering of the Nordstrom flagship store and its main entrance on 57th Street

The Nordstrom family is scurrying to come up with more equity to take the retailer private as it struggles to raise financing for what could be a $10 billion leveraged buyout.

The family had originally planned to put up its 31 percent stake in the company, which as of Aug. 1 was valued at $2.5 billion, and private-equity firm Leonard Green & Partners was to contribute another $1 billion in equity, the Wall Street Journal reported.

But the banks that would fill out the rest by selling about $6.5 billion in debt are concerned that they won’t be able to do so before the all-important holiday shopping season and would have to hold it until next year, the Journal reported. That would leave the banks exposed to further stress in Nordstrom’s business or the broader retail market.

The partners are now trying to come up with more equity for the deal, or could try to find buyers who would take the unsecured debt at interest rates lower than the double-digit figures banks have said they would guarantee.

A highly leveraged buyout could spell trouble down the line. Toys ‘R’ Us filed for chapter 11 bankruptcy protection last month as it was hampered by $5 billion in debt from a 2005 leveraged buyout.

If you layer debt onto a company when growth is already constrained it can further impair the company’s ability to effectively compete,” said Barbara Miller, a stock portfolio manager at Federated Investors Inc.

Nordstrom’s planned store at Gary Barnett’s Central Park Tower would likely not be affected if the company goes private. The retailer has already invested at least $249 million in the project. [WSJ]Rich Bockmann