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NEW YORK — Bluefly Inc. has a guardian angel in the form of George Soros and Soros Private Equity Partners.

This story first appeared in the March 17, 2003 issue of WWD.  Subscribe Today.

The financier granted the off-price fashion e-tailer $2 million in new capital, erased more than $3 million of its debt and exchanged $2.1 million of its Series 2002 Convertible Preferred Stock.

In return, Bluefly issued Soros about $7.1 million of its Series D Convertible Preferred Stock that will earn dividends at the rate of 12 percent annually, payable in cash or stock, at the company’s option, upon conversion.

Additionally, Soros made a standby commitment to provide an additional $1 million in funding.

This latest infusion increased Soros’ stake in Bluefly to about 89.7 percent from near 86.9 percent.

Bluefly investors were delighted by Soros’ confidence and traded up shares of the firm 17 cents, or 22.1 percent, to close at 94 cents on the Nasdaq Friday.

Due to the financing, the conversion price of the firm’s Series B and Series C Preferred Stock decreased to 76 cents from 93 cents. This will create a $225,000 noncash charge in the first quarter.

So far, Soros has pumped about $50 million into Bluefly, more than $40 million of which was invested after March 2000 when investors began to fall out of love with all things Web.

“I don’t think [Soros] ever invested in us because they wanted to invest in the Internet,” said president and chief executive Ken Seiff in a telephone interview. “From the early days, their interest was driven by our business model and our team and the ability of the Internet to modernize the off-price industry.”

Companies with a business focus on the Web may be down in the stock market, but they are not out, he said. “The performances of Internet companies that are still here today have been nothing short of extraordinary. The levels of customer service and experience provided by Internet retailers is surpassing that provided by traditional brick-and-mortar retailers.”

So how has Bluefly avoided going the way of so many Internet firms, as well as the promotional sock puppet? “When you’re looking to raise money, there’s nothing like having a great team that has, in most cases, performed up to or exceeded its plans,” said Seiff.

As reported, Bluefly sustained a $1.7 million loss during the fourth quarter, partially attributable to marketing initiatives, which helped lift sales 24.7 percent to $9.9 million.