The retail industry is close to entering its most important period of the year -- the holiday selling season -- and this year, more than any other, retailers will need to be laser-focused on getting things right from their merchandise to their marketing to their customer service. Nordstom (JWN 40.78, -1.88, -4.4%) knows this, which is why it is suspending its pursuit of a possible going-private transaction.
Nordstrom made the announcement this morning, yet its decision to suspend the exploration of a possible going-private transaction had to do with more than just wanting to be focused on getting things right this holiday. In effect, it had a lot to do with the difficulty it was running into obtaining debt financing to complete a going-private transaction.
This shouldn't come as a complete surprise.
The New York Post reported on October 2 that Nordstrom was having a hard time convincing the banks to provide a large level of debt financing to get a deal done. It was said that Nordstrom was seeking roughly $7 billion to $8 billion of debt financing to get a deal done, but that banks were hesitant to commit to that level of financing given the well-known difficulties afflicting the retailers and the cash flow-generating headwinds those difficulties are presenting.
Nordstrom conceded that it was having difficulty obtaining debt financing in the current environment prior to the conclusion of the approaching holiday season. Accordingly, it is going to focus on its year-end operations, and then possibly pursue a going-private deal after the holiday season concludes.
How the retailer fares during the holiday selling season will be a benchmark for whether it is able to get a going-private deal done at an acceptable price, and on acceptable terms, for its shareholders.
At the moment, shares of JWN are down 4%, reflecting shareholders' disappointment with Nordstrom's latest update. That disappointment, though, has been a lingering feeling.
Prior to today's news, JWN had fallen 9.5% since The New York Post story on October 2 that called into question Nordstrom's ability to get the debt financing it needs to go private.