Nordstrom’s shares took a notable 6.26 percent hit following news yesterday that its plan to go private could be in some trouble due to financial worries and attendant difficulties in finding a financier.
Said more simply: There are concerns that the retailer is on the brink of failing, and financial sources are concerned about throwing money into the deal.
Nordstrom has been formerly exploring a buyout since June. Though there was no confirmation of this from the Nordstrom family, the conventional wisdom, as of last month, was that the retail chain was heading toward a deal with private equity firm Leonard Green & Partners.
But then Toys R Us failed, and the retail landscape with its wild vicissitudes have been making investors very skittish of late.
“Toys R Us isn’t good for anyone,” an unnamed source told the media.
“The financing has not worked out. I hear that the Nordstrom financing is not done and no one knows if it can be done,” the same source observed.
Leonard Green & Partners was supposed to pay out $1 billion to fund Nordstrom’s deal. The firm was expected to decide on the financing deal by the end of September, but participation was contingent on bank financing reaching what the firm considered acceptable levels.
The problem has been getting banks on board with the buyout, as the concern is that malls and physical retailers are about to drastically underperform during the holiday season. The banks, in order to protect themselves, are looking for high interest rates, which would make the deal less than profitable for Nordstrom.
And that was supposed to be the good outcome. The bad outcome was when they just said no.
So, what’s next for Nordstrom?
By the looks of things, however, there might be another big retail bankruptcy to cover soon…