The portion of Barneys New York that remains in bankruptcy court is still facing demands from Google, an employees union and other creditors in the case.
The creditors, which are owed money for services rendered during the company’s bankruptcy, are taking issue with the prospect of professionals in the case, including attorneys, getting paid from a nearly $11 million pool while other creditors face steep losses.
In a filing Friday in New York bankruptcy court, Google said it was owed more than $975,000 for its advertising services during the bankruptcy proceedings.
The New York-New Jersey Regional Joint Board affiliated with Workers United, the union representing Barneys employees including warehouse and sales workers, also told the court Friday that they still haven’t received word on whether employees will receive severance payments or be paid for unused benefits.
Vendors and professionals who provide services to a company during its bankruptcy proceedings are known as administrative creditors, and are technically entitled to be repaid in full. The reality depends on how much the bankrupt estate actually has left in its coffers to make those payments. Barneys has indicated in court filings that approved administrative claims could expect to potentially recover in the range of 15 to 30 percent.
But that’s where it gets tricky — professionals involved in the case, including attorneys and financial consultants, are apparently still getting paid in full. They’re being paid out of a $10,929,848 professional fee escrow account that was funded as part of the sale of its assets in November in the deal with Authentic Brands Group and financial services firm B. Riley Financial, Google pointed out in its filing.
In a monthly operating report filed in court Wednesday, Barneys’ attorneys disclosed that attorneys and advisers for the bankrupt estate and the creditors’ committee had been paid a total of nearly $10.1 million since the retailer filed for Chapter 11 protection in August.
Meanwhile, the union estimates the severance pay owed to employees amounts to roughly $5 million plus paid time off claims worth more than $1 million.
“It is also clear that professionals are not sacrificing like administrative and priority creditors, and are not volunteering or being asked to contribute from fees, success fees, or fee reserves to increase the funds available for distribution to administrative and priority creditors,” the union wrote in its filing Friday. “Administrative and priority creditors, including employees, are left holding the bag.”
Barneys had disclosed in filings earlier this week that as part of the sale of its assets, the buyers set aside $2 million for employee severance payments, of which Barneys said it has already paid out roughly $800,000. Barneys in the filing said it estimates the severance obligations to be roughly $4 million.
“That is, we do not believe the amounts available in the Employee Severance Escrow will be sufficient to pay all severance obligations in full in cash,” Barneys wrote in the filing.
A confirmation hearing for the Chapter 11 plan is scheduled to take place on Feb. 4 in bankruptcy court in Poughkeepsie, N.Y.
Separately, Tiger Capital Group, which has teamed with B. Riley subsidiary Great American Group on the ongoing liquidation sales at Barneys stores, told the court Friday it should be allowed to claw back from companies that Barneys paid within 90 days before it filed for Chapter 11, which includes vendors.
The company is arguing that the Barneys estate transferred the right to pursue such lawsuits, known as “avoidance actions,” as part of the sale agreement. Barneys had paid creditors more than $86 million during that time window, according to court filings.