ISETAN FIRES LEGAL VOLLEY AT BARNEYS
Byline: Vicki M. Young
NEW YORK — Isetan Co. Ltd. stepped up its attack on Barneys Inc. last week in a flurry of legal filings to collect millions in claims against the Pressmans and to protect its real estate interests in Barneys.
In one filing, Isetan is opposing the Pressmans’ motion to stay enforcement of the $203 million state court judgment against them, pending an appeal. As reported, the court held that the Pressmans were liable for $167 million in loans that they personally guaranteed. With interest, the figure tops $203 million.
Isetan has initiated action to collect on that judgment against Gene and Robert Pressman, owners and co-chairmen of Barneys. However, the Pressmans have contended that their interests are protected by trusts.
Isetan also filed papers opposing Barneys’ request for a $10 million breakup fee for an approved purchaser that is later outbid. And Isetan will file papers today to block Barneys’ request for an extension of time on its exclusive right to file a reorganization plan.
However, Barneys and the creditors’ committee have reached agreement on a 90-day extension to Aug. 2, according to a source close to the committee. Since it filed Chapter 11 in January 1996, Barneys has been granted several 90-day extensions. The committee has also backed Barneys on the breakup fee, as reported. A hearing on both matters is scheduled for Thursday.
It’s possible that in the Isetan opposition papers there will be information on its reported agreement with Saks Holdings Inc. to jointly pursue a bid for Barneys. Sources said a key issue is the rent on Barneys flagships. Isetan last week denied there was any signed agreement.
On March 25, New York State Supreme Court Justice Herman Cahn ruled that Isetan can collect on loans personally guaranteed by the Pressman brothers. The loans were used to cover cost overruns in the building of Barneys’ three flagships in Beverly Hills and Chicago and on Madison Avenue.
An Isetan attorney said that the Japanese retailer is not restrained from seeking liens or restraining orders against the personal assets of the brothers to prevent asset liquidation. Those liens, at the very least, could be placed against homes, cars and other personal property.
Lester Lazarus, a partner at the Lazarus & Lazarus law firm, said Friday that a restraining order could be served on every possible entity that might have a connection to the Pressmans, whether a bank, a brokerage or a trustee.
He explained that the purpose of the restraining order is to put someone on the alert that the Pressmans don’t have the automatic right to dispose of the property or interest in question.
As for the $10 million breakup fee, Isetan is charging that Barneys’ request without a bid on the table is akin to asking the judge to abdicate control over the bidding process. Isetan pointed out that a judge can’t determine whether the breakup fee is appropriate without knowing the bidding procedures, the identity of the purchaser and the terms of the purchase agreement. Isetan noted that Barneys has not provided any of that information.
The Japanese retailer also charged in court papers that Barneys’ financial adviser, Blackstone Group, is helping to engineer an investment strategy that gives bidders the impression that Isetan would accept an annual rent of $10 million for the three flagships. Barneys owes approximately $25 million a year but is currently paying $10 million on an interim basis. A hearing on whether Barneys can continue paying the reduced rent is scheduled for April 29.
Neither Blackstone nor Barneys could be reached for comment.
In addition, Isetan asked Manhattan Bankruptcy Judge James L. Garrity to reconsider his decision allowing a royalties dispute to be decided by the court instead of arbitration. Barneys claims it is owed royalties under a licensing agreement covering its stores in Asia operated by Isetan. Barneys terminated the agreement in September, and a separate dispute over that action has been submitted to arbitration.