POSSIBILITIES, PRO AND CON
The clash between Barneys and Isetan has fast become a bitter affair, and the upscale retailer’s Chapter 11 could drag on for months, maybe years. It’s clearly too early to predict the outcome, but here’s a look at a few possibilities.
Best Case Scenario
The dispute is settled in just a few months, with Isetan exchanging its claims against Barneys and the Pressmans for a minority interest in the American retailer. The Pressmans would retain a controlling interest.
Trade creditors would be paid 100 percent of their pre-petition claims in cash within three or four months. Pre-petition bank loans would be paid in full, and note holders would get new notes, possibly with a stretched maturity and a sweetened interest rate.
Barneys’ business would continue normal operation, earning a profit, which will be shared with Isetan instead of draining Barneys cash with mandatory rent and interest payments.
After completion of the Chapter 11 proceeding, vendors would be paid promptly on normal terms.
The Barneys-Japan license will be continued and the volume of the stores in Japan would grow at an accelerated pace. Isetan would continue to own 80 percent of Barneys-Japan, and the Pressmans, 20 percent.
Worst Case Scenario
The dispute between Isetan and Barneys could drag on for years while pre-petition creditors sit waiting to get paid. The court could finally rule in favor of Isetan, which would be in a position to foreclose on Barneys in the three trophy stores and try to get another luxury retailer to take over the premises.
The licensing deal in Japan could come apart, depriving Barneys of the royalty income it now receives.
Meanwhile, Barneys business could also deteriorate to the point at which mounting losses require that some stores be closed. Or even worse, the entire business might be liquidated, with the proceeds going to creditors and to pay the costs of the proceedings. Unless there is a surplus after all these payments are made, the Pressman family would be left with no interest in the business.