NEW QUESTIONS ON DICKSON-BARNEYS DEAL
Byline: Vicki M. Young
NEW YORK — Dickson Concepts’ signing of a definitive agreement to buy Barneys Inc. is a “good first step” to resolving the bankruptcy and satisfying creditors but “not by any means” the end of the investor process to determine who gets Barneys.
So said Lawrence Handelsman of Stroock & Stroock & Lavan, counsel for the unsecured creditors’ committee, at a Barneys bankruptcy court hearing here Wednesday.
At the hearing, Manhattan Bankruptcy Judge James L. Garrity Jr. approved up to $8 million in fees payable to Hong Kong-based Dickson Concepts Ltd. if Dickson is ultimately outbid for Barneys.
The deal took a step forward when Dickson signed a definitive agreement on Sept. 12 after its $247 million bid was accepted on Aug. 3 by Barneys and the creditors’ committee.
But on Wednesday, after the hearing, Handelsman told WWD that there are other parties still “expressing interest” in Barneys.
He declined to specify the parties, but said they are the ones who previously expressed interest in the bankrupt retailer.
Aside from Dickson’s bid, The Texas Pacific Group and Heico Acquisitions also bid for Barneys in August.
Earlier, Saks Holdings Inc. withdrew its bid.
According to Chris Rogers, a vice president at Heico, the investment firm remains interested in pursuing a bid for Barneys.
Officials for Texas Pacific and Saks could not be reached for comment.
Barneys declined comment.
Although no objections to the fee requests were filed, attorneys representing Isetan and Barneys’ furniture, fixture and equipment lessors at Wednesday’s hearing expressed doubt that an agreement could be reached on the payout allocations to creditors.
David LeMay of Hughes Hubbard & Reed, counsel for Isetan, told Garrity that Isetan was “not at ease” with certain terms in the Dickson offer and found the Dickson offer “profoundly unacceptable.”
LeMay said that if “Dickson keeps saying ‘no”‘ on some issues, the deal won’t go through. Nevertheless, Isetan is willing to continue with the negotiations.
Among the potential stumbling blocks, Isetan feels Dickson’s offer to pay $9 million in annual rent for the three Barneys flagships isn’t high enough. The original rent agreement — a sore point between Barneys and Isetan — called for annual payments of approximately $23 million.
There are also issues concerning the Asian license arrangement, such as royalty payments to Dickson from Isetan, which operates two Barneys stores in Japan.
Seth Gardner of Wachtell Lipton Rosen & Katz, counsel for the furniture, fixture and equipment lessors, told Garrity that after the lessors’ unsuccessful negotiations over the last 15 months with Barneys regarding rent payments, he thought it was “unlikely” that an agreement could be reached within three months.
December 18 is the cutoff date for negotiating the payout to creditors, according to Judge Garrity. Litigation of the outstanding issues between Isetan and Barneys, including rent and the Asian license, would likely follow.
According to Dickson’s offer, his bid stays on the table for three months to allow the parties time to negotiate a payout to creditors.
An inability to reach an agreement would likely derail the Dickson offer. Should that happen, Dickson would be free to terminate its offer and would be entitled to a $1.5 million “commitment” fee.
If an agreement on the payout to creditors is reached, Barneys would ask the court to approve the Dickson offer. However, under the bankruptcy proceedings, it would still be possible for another bidder to come in and top Dickson’s bid. If the higher bidder gets the deal, Dickson would receive the breakup fee of up to $8 million.