By: Hadassa Kalatizadeh
The once famed retailer, Barneys New York, has its fate looming in midair. The bankrupt luxury department store chain has until October 3rd to pick a suitor, or a real offer for selling itself to potentially interested buyers.
As reported by Crain’s NY Business News, last week, Barneys debtor-in-possession lenders moved up the deadline from late October to this Thursday to secure an offer, or else face liquidation. This was reportedly done to pressure potential investors, a handful of whom have expressed some interested in the designer apparel chain which was founded in 1923. Possibly interested parties include Authentic Brands, upscale department store Nordstrom, fashion trade show and retail executive Sam Ben-Avraham, and the finance firm Ares, as per WWD.
The 96-year old, NY-based chain, which is currently owned by Perry Capital, owes $100 million in unsecured trade debt. It filed for bankruptcy protection on August 6th, and if the company is liquidated, unsecured creditors will receive only a minute fraction of what they are owed when the dust settles in court. Also, in the event of liquidation, in-season luxury merchandise would unloaded at deeply discounted prices, which would hurt other vendors. Barneys would also have the ability to claw back payments it made to vendors for merchandise within 90 days of filing for bankruptcy, as per bankruptcy-code rules. For these reasons, vendors are extremely concerned about whether Barneys will find a proper suitor.
A base value for the company has not been established by an initial or reserve bidder, so the company needs to work harder to avoid low bids for buyouts and attain the highest possible price. Barneys has received permission from the court to continue paying its executives and staff members. Barneys’ CEO Daniella Vitale, who reportedly has been receiving a gross salary of $48,000 every two weeks, is still scrambling to secure a sale, along with chief restructuring officer Mohsin Meghji. Vitale and chief financial officer Sandro Risi have extra incentive to reach an agreement, thanks to an approval to split a $1 million-plus bonus, should they succeed in completing a sale which meets the set guidelines.
Finding an investor will not be so easy, being that Barneys, which has already downsized to seven stores, lost $16.3 million in just the three-plus weeks after filing for bankruptcy. The estimated valuation is also a hefty figure, which not every suitor can come up with. At a court hearing in September, Meghji assessed the floor value of a deal to be approximately $220 million, including about $195 million in secured debt and $25 million in administrative and priority claims, as per WWD.
