A TROUBLED HISTORY OF SLOW PAYMENTS
NEW YORK — Barneys’ reputation for slow payments to the trade appeared to crest in December 1993, when published reports on the problem forced the retailer to speak out.
At that time, the company blamed the payments complaints on “poor communications” with its vendors and strongly denied any financial problems. A private company, Barneys released figures showing a highly profitable operation and a strong balance sheet.
But despite denials from Barneys, a number of factors cut off credit to the retailer in February 1994, because of slow payments, the inability to get up-to-date financial information and a problem getting phone calls returned. At the time, Barneys insisted that factors that did business with the company were getting complete financial information.
In April 1994, the company floated a $40 million private placement with a group of insurance companies. Of the proceeds, $10 million went to reduce Barneys’ bank debt and the rest was to be used for general corporate purposes.
The private placement was arranged by Chemical Securities, the securities arm of Chemical Bank, the lead bank on Barneys working capital credit line.
After the private placement, talk of slow payments died down. However, this month there was a renewal of complaints from vendors about Barneys’ payments. One vendor, who requested anonymity, reported that he was owed about $70,000, the bulk of which dated back to October. He said he had been monitoring the stores, and most of his merchandise had already been sold by Barneys.
There were other reports that Barneys had discontinued all payments last November. However, one factoring firm said that it had received some payments in early December.
Barneys continues to insist that its retail business is strong and growing and that the problem is one of capital structure rather than operations.