Things aren't looking pretty for Neiman Marcus. Business of Fashion has reported that Marble Ridge Capital LP said in a letter to Neiman Marcus Group Ltd LLC that the luxury department store company may be in default on its debt after it moved its MyTheresa business into an entity belonging to the retailer's private equity owners.

"These recent actions threaten the viability of a storied franchise that includes marquee brands such as Neiman Marcus and Bergdorf Goodman," in regards to the other luxury department store Neiman Marcus own, according to a statement made by Dan Kamensky, managing partner of Marble Ridge.

Marble Ridge is working with law firm Brown Rudnick LLP, and is organizing with other creditors to look into the MyTheresa move.

"We believe a more responsible board would have engaged in a strategic review to maximise value for the benefit of all of the company's stakeholders," Kamensky said in a statement to Business of Fashion.

Ares Management LP and the Canadian Pension Plan Investment Board, both buyout firms, acquired Neiman Marcus for 6 billion in 2013, leaving the company with 4.7 billion dollars in debt. On Tuesday, Neiman Marcus announced they had moved MyTheresa to a separate entity called Neiman Marcus Group Inc, owned by the two buyout firms.

“As publicly disclosed, MyTheresa was already an unrestricted, non-guarantor subsidiary not part of our lenders’ collateral and it will remain outside of the collateral," Neiman Marcus said in a statement. "This reorganisation was expressly permitted by the company’s credit documents.”

It is likely that this transfer made the company insolvent, as reported by Reuters. They were able to get their hands on a copy of the letter which stated that moving MyTheresa removes "an important and valuable asset away from the creditors of the company and (gifts it) to Ares and CPPIB." In exchange, the creditors received nothing.

The reason the creditors are so up in arms about this whole MyTheresa situation is because that was the crown jewel of Neiman Marcus' portfolio. MyTheresa's earnings growth has outpaced Neiman Marcus, Neiman Marcus Last Call, and Bergdorf Goodman online according to Reuters.

There is this potential for this to turn into a legal battle, however, we will have to wait and see the creditors next move.