By Sindhu Sundar
with contributions from Jean E. Palmieri
 on October 23, 2019
Barneys New York's Beverly Hills store.

Kith investor Sam Ben-Avraham submitted a roughly $260 million bid to buy Barneys New York as a going concern, according to a person familiar with the matter.

The bid envisions keeping about five of its stores open, including its Madison Avenue and Beverly Hills flagships, as well as a distribution facility in New Jersey.

Barneys will now consult with its creditors committee as it evaluates the bid to determine whether it qualifies for an auction that is scheduled to take place on Monday. If it qualifies, Ben-Avraham’s bid would compete with the $271.4 million stalking-horse bid led by Authentic Brands Group, which plans to liquidate Barneys’ inventory while deciding whether to keep or reject the luxury retailer’s current leases. The ABG bid also comes with an $8.1 million break-up fee.

The court could decide to go with a lower bid if it is seen as a better deal overall. But some sources close to the situation are skeptical of Ben-Avraham’s effort to buy Barneys, which has struggled to come up with the necessary cash to enter the process. On Sunday, he reached out to fashion industry executives in an open letter soliciting support and funds — an unusual step in the world of multimillion dollar dealmaking.

One source described Ben-Avraham’s bid as “amateur hour” while another called it “highly competitive.”

A representative for Barneys could not immediately be reached for comment Wednesday.

Barneys has essentially sought to pull through the bankruptcy with a buyer who would promise to keep at least some of its remaining stores open. At the time it filed for Chapter 11 protection on Aug. 6, it announced it was closing 15 stores. 

The process has been marked by a push that has required repeated extensions — first to lock down its stalking horse and then to receive competing bids, as potential buyers including Ben-Avraham worked to assemble offers. 

The auction on the bids is scheduled for Monday, and a sale hearing would take place in New York bankruptcy court on Oct. 31. 

If the $271.4 million offer by Authentic Brands Group and B. Riley prevails, it could dramatically change Barneys as it exists. The ABG offer envisions buying Barneys’ web site and intellectual property, potentially for use at Saks Fifth Avenue stores as part of an arrangement between ABG and Saks’ parent Hudson’s Bay Co. 

But it’s not clear whether and how the ABG plan would maintain Barneys’ current locations. If the court approves the ABG deal, it would set off immediate liquidations of inventory at the remaining seven Barneys stores, while the new buyers decide on keeping or rejecting Barneys’ store leases.  

Meanwhile, Barneys has also continued to lose money during the bankruptcy proceedings, according to monthly operating reports filed in court. From Sept. 1 to Oct. 5, the company incurred a net loss of roughly $8.6 million, while its net revenues for the period amounted to $52.9 million. From Aug. 6, when it filed for bankruptcy, to Aug. 31, its net loss was roughly $16.3 million and its revenues were $31.6 million. 

Barneys’ scramble lately to find buyers who would keep it alive mirrors the urgency leading up to its Chapter 11 filing. Since around June, the retailer pursued its financing and potential sale options with dozens of strategic or financial investors, its chief restructuring officer Mohsin Meghji, managing partner of M-III Advisors LP, has said in court filings.

Having run out of time, the retailer entered the bankruptcy proceedings without a pre-packaged plan or a potential buyer in place, but creditors — including some top vendors and its employees — have supported its goal of emerging as a going concern.

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