Byline: Valerie Seckler

NEW YORK — It might not lead to a bidding war, but there could be a skirmish of sorts.
Wall Street sources said Tuesday that they expect bidding for Barneys to warm up now that Saks Fifth Avenue has fired its long-anticipated salvo, an offer of at least $290 million for the bankrupt chain, plus a reported $50 million to Isetan.
“Dickson Poon started off the bidding for Barneys at $240 million, which didn’t force Saks to come in at the high end,” observed one financial source. “I wouldn’t be surprised if additional bids come from both Dickson Poon and Saks. I don’t see Neiman Marcus stepping up to the plate.”
While at least one factor received a flurry of phone calls Tuesday from Barneys vendors who were cheering the possibility of a deal with Saks, the unsecured creditors in the case were said to be left cold by the $290 million Saks offer. The bid would provide those creditors a payout of a meager 20 cents on the dollar.
“At these sorts of recoveries, I think the unsecured creditors would rather take their chances on a stand-alone plan and hire new management,” said a source familiar with the situation. “However, if Saks put another $100 million on the table, I presume it would be much more attractive.
“There is a very low likelihood the unsecured creditors would accept either the Dickson offer or the Saks bid at $290 million,” the source added. “It’s a pretty grim situation.”
John Bright, a vice president and trader in distressed securities at Oppenheimer & Co., said, “I think expectations about a Barneys deal are lower than they were six months ago, but the unsecured creditors and purchasers of the Barneys debt have nothing to gain by showing their cards before the due date for bids.”
The earliest due date is May 8.
Stacy C. Pak, retail analyst at C.S. First Boston, an underwriter of the Saks initial public offering last May, said, “I believe Saks would only deal for Barneys in a way that would add to Saks’ earnings.” In a statement Tuesday, Saks estimated it will earn 20 cents a share for the first quarter ending May 3, up from 9 cents a share in 1996, on a 12 percent sales gain to $520 million. Saks expects to report its actual first-quarter results on May 15.
Benefits of a Saks-Barneys deal, Pak said, would include the extension of Saks’ core 45-to-54-year-old customer base into a younger, hipper, well-heeled thirtysomething consumer, as well as the potential for Saks to leverage Barneys’ private-label expertise and to open Barneys concept shops in Saks stores.
“Importantly, Saks has a global brand name that would give it the muscle to build up Barneys abroad,” Pak noted.
Sources said Saks could issue stock to finance a Barneys bid, and that under such a deal investors would focus on the “lock-up period” — the time the stock must be held before it can be sold. As creditors are interested in cash for their claims rather than an equity investment, they would be looking to recoup those credits as quickly as possible.
“I had a dozen conversations with Barneys vendors today, and they were all anxious for Saks to make a bid because they believe it would be good for Barneys and would therefore help them gain a bigger presence in the store,” said Gary Wassner, president of Hilldun Corp., a designer-niche factor.

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