With David Jackson, the chief executive officer of Istithmar World, out of the job as of Tuesday, the Dubai-based investment company appears intent on accelerating restructuring efforts for its various operations, including its U.S. retail holdings, Barneys New York and Loehmann’s.
Aidan Birkett, the chief restructuring officer of Istithmar’s parent, Dubai World, on Wednesday said Andy Watson would be interim ceo, succeeding Jackson. “We are pleased that Andy is stepping in as acting ceo of Istithmar World,” said Birkett, who is leading the moves by Dubai World to renegotiate $27 billion in debt. “His experience will be vital in actively managing the portfolio of assets held by Istithmar World.”
Under Jackson, Istithmar World “expanded rapidly as a private equity investment house during the years before the economic crisis hit,” Birkett said, adding, “Today, Istithmar World is focused on the steady-state management of existing assets to maximize value rather than on private equity investment.”
With Jackson out, there was also speculation that Barneys could renew the hunt for a ceo of its own, though sources Wednesday said there have been no indications yet the search is heating up. The luxury chain has been operating without a ceo since July 2008 and is being run by a committee of seven executive vice presidents who reported into Jackson. He advocated international expansion, which may have deterred ceo candidates considering Barneys hasn’t gained traction in several U.S. markets including Boston; Dallas; Scottsdale, Ariz.; San Francisco, and Las Vegas, where large flagships were opened in the last few years and have not performed as well as longer-standing locations on Madison Avenue in New York, in Beverly Hills and Seattle, as well as Chicago. Many Co-op units, which are smaller shops specializing in contemporary styles and denims, were also opened in the last few years, with mixed success.
According to retail observers, more of a turnaround expert is required now to guide Barneys through its challenges and the tough economy, not someone with an eye for expansion.
A hint that Jackson’s days were numbered came months ago, when Watson was quietly added to the Barneys board, joining Jackson there. Watson has yet to attend a Barneys meeting, but sources outside the company expect him to serve more as a point man between Barneys and Dubai World, as Jackson did, rather than as an active participant in steering the business. Jackson is said to have met with Barneys executives three or four times a year, primarily for board meetings.
One source noted that Jackson was removed from Barneys oversight temporarily last year, with Nakheel executive Graham Dreverman taking the role, but Jackson was reinstated. Nakheel is the real estate arm of Istithmar.
Neither Jackson nor Watson could be reached for comment Wednesday.
Jackson’s departure this week isn’t Istithmar’s first shakeout. A few of his colleagues in investments left last year.
According to Dubai World, Watson has an extensive background in the Dubai World group and was previously a director with Barclays Capital, the investment banking division of Barclays Bank group. One source said he held an important role at Nakheel.
Jackson, a former Saks Fifth Avenue assistant buyer and Lehman Brothers mergers and acquisition executive, became ceo of Istithmar in 2006 and quickly put the company on the acquisition trail. Barneys was purchased from Jones Apparel Group Inc. in 2007 for more than $900 million. He also led Istithmar’s acquisition of the Mandarin Oriental hotel in New York, the Fontainebleau in Miami and the W Hotel in New York’s Union Square, which Istithmar lost in an auction last year. Istithmar also owns a stake in Cirque du Soleil as well as investment banking boutique Perella Weinberg, which was retained in August by Barneys to advise on options for the restructuring of its debt.
On the books, there is about $500 million in long-term debt, including a $270 million term loan maturing in 2014 and a mezzanine loan of about $230 million maturing in mid-2016. There also is revolving credit debt, which, based on available working capital, varies from month to month and matures in 2012.
A large portion of Barneys’ bank debt is held by two hedge funds — Ron Burkle’s Yucaipa Cos. and Perry Capital, headed by Richard Perry. Sources familiar with Yucaipa’s operations have said there is no particular strategy in place for Barneys, though the company would be in position to up its stake in the event of a bankruptcy.
Thus far, though, Dubai World said Istithmar is on a stable footing: Barneys has been paying its bills and Loehmann’s last month secured a three-year, $35 million asset-based revolving credit facility with GE Capital, Corporate Retail Finance.
Also last month, Abu Dhabi came to the rescue of Dubai, announcing a $10 billion loan, though there was some confusion subsequently when reports surfaced that only half that amount was new. The other half stemmed from loans granted weeks before by two Abu Dhabi banks. Dubai and Abu Dhabi are among the seven states that comprise the United Arab Emirates.