Nordstrom (JWN 44.15, -3.00, -6.4%) is a publicly-traded retailer that is reportedly aiming to go private so it can make the changes it would like to make to its business without being subjected to the quick-strike appraisal of the stock market that accompanies each quarterly earnings report. The New York Post has reported, however, that Nordstrom's privatization effort might be hitting a financing snag.
Last month it was said that private equity firm Leonard Green & Partners was close to a deal where it would provide about $1 billion in equity for Nordstrom to help it go private. The retailer had a lot of added financing work cut out for it, though, as it was said to be seeking $7 billion to $8 billion of debt to finance the deal.
According to sources who spoke to The New York Post, Nordstrom is having a hard time convincing the banks to provide that level of debt financing.
The banks' reservations relate to the well-known difficulties afflicting mall-based retailers, namely declining traffic, rising competition from online sources, and changing consumer buying preferences, that have triggered concerns about future cash flow and repayment capabilities.
Reportedly, banks aren't willing to provide the financing due to those concerns, which were heightened recently by the bankruptcy filing by Toys 'R Us, or they are presenting terms with much higher interest rates that are killing the appeal of the privatization effort.
The New York Post said neither Nordstrom nor Leonard Green & Partners responded to requests for comment, yet the market's early response to the report implies investors are having their doubts about Nordstrom being able to take the company private.
Shares of JWN are down 6.4%. When Nordstrom declared its intent on June 7 to explore the possibility of a "going private transaction," the stock was trading at 40.48.