Private Equity Deal Continues to Elude Nordstrom

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Nordstrom

Four months after the Nordstrom family announced plans to take the retailer private, the group still hasn’t been able to lock down financing for the venture. And a report in today’s New York Post suggests time might be running out.

Last month rumor had it that the Nordstroms had found a buyout partner in Leonard Green & Partners. The private equity firm was reportedly closing in on a deal for about $1 billion to help fund the undertaking. From there, it’s estimated that the family would need to raise another $6.5 billion to finance the buyout, and that’s what’s been an issue, sources told the publication.

Apparently banks have been spooked by the state of retail today. Specifically, the Post suggests the recent Toys R Us bankruptcy is the latest in a flood of bad news serving to douse investor interest.

[Read more about the Toys R Us issues: Toys R Us Makes a Play for Survival With Bankruptcy Filing]

One of the sources said “the deal is in deep trouble.”

The banks that have been willing to work with the Nordstroms team, which includes co-presidents Blake W. Nordstrom, Peter E. Nordstrom, and Erik B. Nordstrom, president of stores James F. Nordstrom, chairman emeritus Bruce A. Nordstrom, and Anne E. Gittinger, have reportedly offered financing at interest rates that would leave the retailer too highly leveraged.

While a deal that would take the business private would allow the family to institute changes and investments necessary for keeping pace with the changing nature of retail, the team is no doubt wary of becoming another cautionary tale of the pitfalls of going the private equity route.

Retailers like Rue21, Payless and Gymboree are among those that were crippled by private equity buyouts, ultimately leading to bankruptcy filings. Still more chains like J.Crew and Neiman Marcus continue to grapple with ballooning debt as a result of deals like this.

Even without a deal in place, the retailer is attempting to test new formats, the most recent being a store with no merchandise. The so-called Nordstrom Local concept, which will launch in West Hollywood later this month, will focus on experiences like manicures and tailoring, only allowing customers to shop via personal stylists who will pull looks from neighboring Nordstrom stores for appointment-only purchases.

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