Financing a Problem for Nordstrom’s Go-Private Plan

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When Nordstrom Inc. (NYSE: JWN) announced a plan to take the company private last June, shares bounced to just over $47, where they stayed until Monday morning.

A report late Sunday in the New York Post cited unnamed sources who say the Seattle-based retailer is having trouble lining up financing for the buyout. Banks and private equity firms are wary of the downturn in traffic, revenue and profit at mall-based stores like Nordstrom.

The recent bankruptcy filing by Toys “R” Us didn’t help. One source told the Post:

The financing has not worked out. I hear that the Nordstrom financing is not done and no one knows if it can be done. Toys R Us isn’t good for anyone.

The Nordstrom family controls about 31% of the company’s outstanding stock and had reached a deal with private-equity firm Leonard Green & Partners that would have the firm invest $1 billion in preferred stock. But the agreement with Green was contingent on arranging bank financing to fund the rest of the buyout, which could have had a total value of more than $10 billion.

In August, the retailer posted quarterly diluted earnings per share (EPS) of $0.65 on revenues of $3.79 billion beating consensus estimates for EPS of $0.64 and $3.75 billion in revenue. Nordstrom even raised the low end of its full-year EPS guidance and its full-year sales guidance. Comparable store sales for the quarter rose 1.7%. Net sales rose 3.5% year-over-year.

Estimates for the current quarter call for EPS of $0.64 and revenues of $3.59 billion. In the third quarter of last year, Nordstrom reported EPS of $0.84 and sales of $3.54 billion. Given the expected performance of other department stores, that’s not too bad.

But it does not appear to be enough to finance an estimated $6.5 billion to fund the buyout

Nordstrom stock traded down about 6.7% Monday morning, at $43.99 in a 52-week range of $39.53 to $62.82. The 12-month consensus price target is $46.58.