The Barneys New York waiting game continues.
Multiple sources said Tuesday’s 5 p.m. deadline for bids to buy the bankrupt retailer was pushed back by 24 hours, giving would-be investors another day to firm up financing and their plans and line up an offer.
And at least one familiar name has reemerged on the Barneys scene: David Jackson, chairman of luxury investment and advisory firm Solitaire, told WWD he was racing to line up backing from the Middle East for a potential bid that would keep Barneys alive.
The one-day delay keeps the door open for a competitor to emerge and challenge Jamie Salter’s Authentic Brands Group, which submitted a $271.4 million bid to buy the company last week. The offer serves as a baseline for the auction scheduled for Monday, Oct. 28. Salter’s plan envisions liquidating merchandise at the stores still open, but potentially keeping some of the doors and setting up a Barneys presence in Saks Fifth Avenue, under an agreement with that retailer’s parent company, Hudson’s Bay Co.
The extra breathing room could be just enough to finally nail down an offer from a group led by Sam Ben-Avraham, founder of the Project and Liberty Fairs trade shows and an investor in Kith. Ben-Avraham has been pushing hard to drum up money to buy the company and coming up short, but a source said his group was once again in talks with factor and fashion financier Gary Wassner, who could potentially help pull things together.
Among the other investors aligned with Ben-Avraham are his brother Uzi, owner of the real estate company Premier Equities; fashion entrepreneur Andrew Rosen; Ron Roman of Bergen Logistics; Khajak Keledjian, founder of Intermix, and Ron Burkle of Yucaipa Cos., which owned 20 percent of Barneys when it went bankrupt.
But Burkle’s not the only player with intimate experience with Barneys.
Solitaire’s Jackson has been here before, having served as chief executive officer of the Dubai-based investment fund Istithmar when it acquired Barneys from Jones Apparel Group in a 2007 all-cash deal that valued the retailer at $942.3 million.
“We are working on our submittal which will be tight,” Jackson told WWD. “The timing is against us. Our backers are out to the Middle East and with August break spilling into September with other obligations they only became aware of the situation recently. They contacted me last week. We developed a strategy that would keep the business open, revitalize the remaining stores, deepen the online business and expand [with a] physical footprint in the Middle East, possibly China. They are convinced the strategy is right, that Barneys is salvageable. Not sure if we can get this done in 48 hours,” in time for the auction.
The Istithmar deal for Barneys saddled the luxury retailer with more than $600 million in debt and Richard Perry as the major lender. In 2012, with both Isitithmar and Barneys struggling, Perry became Barneys’ owner, circumventing a possible bankruptcy. Istithmar still owned about 8 percent of the retailer’s equity when it was finally forced to file for Chapter 11 in August.
The latest auction for Barneys is expected to be held on Monday at the Manhattan offices of Kirkland & Ellis, which represents the retailer. A sale hearing is scheduled to take place on Oct. 31 before New York bankruptcy judge Cecelia Morris.
Even if ABG’s rivals can’t top its bid in terms of dollar value, they could nonetheless persuade the court that their plan would be a better outcome for the retailer, its vendors and employees, if it involves maintaining the store base.
With Barneys’ soaring rent on its flagships in Manhattan and Beverly Hills generally seen as a factor that nudged it toward bankruptcy, Ben-Avraham is said to have sought rent concessions from Ashkenazy Acquisition Corp., which owns those sites. The store’s rent at the Madison Avenue location alone had nearly doubled last year from $16 million — an adjustment that many have said was the final straw for the company’s finances.
Whoever prevails, the process has already completely reshaped Barneys, which ultimately found itself in a niche that did not drive enough sales to support its costs.
The retailer has closed 15 of its 22 stores since filing for bankruptcy on Aug. 6
If ABG’s bid prevails, that would trigger liquidations of Barneys’ inventory, while ABG considers whether to keep any of the retailer’s current stores. In preparation for that possibility, Barneys has issued notices to employees they may be laid off in November, an attorney representing the employees’ union confirmed to WWD on Tuesday. The New York Post first reported that Barneys had sent those notices.
Such disclosures are generally required by the federal Worker Adjustment and Retraining Notification Act, or WARN Act, and corresponding state laws. The notices to Barneys’ employees don’t necessarily mean they will all be laid off, especially if Barneys can secure a buyer who will promise to keep stores open, according to Thomas Kennedy of Cohen Weiss & Simon LLP, an attorney for New York New Jersey Regional Joint Board of Workers United, which represents some 800 Barneys employees, including sales people, clerks, tailors and warehouse workers.
“As Barneys management has advised its employees, the Nov. 1 layoff notices were sent by Barneys as a legal matter to comply with its WARN Act obligations and do not in our opinion represent a real date for our members,” Kennedy said on Tuesday.
While Barneys’ woes are unique to its own situation and positioning, which had it walking the line between cool and commercial, the company has also been buffeted by broader trends that have retailers across the spectrum struggling to remake their businesses for new times.
Research from BDO shows that retail bankruptcies in the first half marked an acceleration from the trend in late 2018 as companies struggled with excessive debt, overexpansion, private equity pressures and the fast-moving industry.
The fallout after holiday 2018 was particularly tough, with 10 retailers succumbing to bankruptcy in the first quarter, including Payless ShoeSource, Gymboree and Charlotte Russe, which subsequently closed a total of 3,700 stores.
All of that came before Barneys, Forever 21 and, just this week, Destination Maternity filed for Chapter 11.
BDO noted that most bankruptcies in the first half ended in an asset sale and/or a liquidation and pointed to Shopko, which went into bankruptcy contemplating either a reorganization or sale, but ending up winding down operations.
Barneys went into bankruptcy in an especially tenuous position, with an immediate liquidation seeming like a possibility right up until the Chapter 11 filing for a reorganization of its debts came Aug. 6.
Now, the end game has come and whether the company will be kept together or separated into its various parts will be determined by the court.