KEY VENDORS HOLDING BARNEYS SHIPMENTS, PRESS FOR GUARANTEES
Byline: Rich Wilner — with contributions from Koji Hirano, Tokyo, and Jeff Siegel
NEW YORK — Barneys’ spring season could be a very late bloomer — if it blooms at all — as vendors continue to hold up millions of dollars in shipments.
Despite getting $28 million in debtor-in-possession Chapter 11 financing, Barneys has not won the confidence of several key vendors, such as Hugo Boss and Marzotto, who said Monday that spring goods won’t be shipped until they receive additional assurances that they will be paid.
Barneys president Charles Bunstine, at a packed creditors’ organizational meeting here Monday, said, “Business continues to move ahead positively,” with store-for-store sales in January up 2.5 percent.
In other developments Monday:
* Isetan, Barneys’ global partner, continued its verbal assault on the Pressman family, with a senior executive telling WWD the Chapter 11 came about “only because of the Pressmans’ dishonesty or insincere management.”
* Vendors looking to sell their claims saw the price slip again to 40 cents on the dollar, with vulture funds finding supply far outstripping demand.
* The U.S. Trustee appointed a 15-member committee of unsecured creditors, which included three trade creditors.
* Barneys’ equipment lessors, owed about $40 million for items ranging from telephones to pricey tie racks and $12,000 sofas adorning offices and the Madison Avenue store, banded together to protect their claims.
Barneys is scheduled to be back in court today to receive another portion of the $100 million DIP financing.
The interim DIP — half of which will cover letters of credit — was approved in bankruptcy court last Thursday.
As for the feud between Barneys and Isetan, the flames were fanned Monday by published reports that Isetan executives want the Pressman family excluded from a management role at a reorganized Barneys.
However, Michio Jomori, Isetan’s senior vice president, told WWD Monday that the giant Japanese retailer would take no specific action at this point to oust the Pressmans. He also pointed out that Isetan will make no attempt to evict Barneys from the three stores it helped build.
But the bitterness remains. “Isetan has always been true to what Isetan and Barneys agreed to do. I cannot understand what Barneys did to us,” Jomori said.
Asked about the possibility of Isetan’s eventually trying to evict Barneys from its real estate, Jomori said it had no such plans now, but added, “Of course, there is a clause about eviction if they default on their obligation, which means a delay or default of rent payments. But Isetan will not ask Barneys to get out. Isetan will be happy if Barneys pays the rent. We will ask for the payment in court. In the first place, the rental fee is a part of their operating expenditure. It is unreasonable to ignore it.”
Could the Pressmans — the founding family of Barneys — actually be ousted? In theory, yes.
In a Chapter 11 reorganization, ownership of a company can be supplanted when large blocks of debt are purchased. This debt can be converted into equity under a plan that can replace the original owners.
While there doesn’t seem to be a plan in place to achieve that goal, Jomori said, “Since Isetan is a public company, we are responsible for our shareholders. We will take the best action to protect our rights and what we have invested and loaned.”
And Jomori couldn’t resist a parting shot, when he indicated that Isetan wants to continue with the Barneys business in Japan, noting, “Barneys Japan is doing pretty good business, because Isetan runs it.”
Meanwhile, the creditors’ meeting Monday was short, tense at times and hardly illuminating on Barneys’ condition. Presentations to about 150 lawyers and creditors by Bunstine and John Campo, attorney for Barneys, were kept short. Campo basically recounted events this month leading to the filing.
At one point, David LeMay, attorney for Isetan, broke into Campo’s speech, and asked the U.S. trustee, Diana Adams, to stop what he thought was a biased “colloquy.” The trustee refused to cut Campo short. Later, LeMay attempted to present Isetan’s view, but again was rebuffed by Adams.
Bunstine, who is also Barneys chief operating officer, brought the audience up to date on the chain’s business since the filing and said Barneys was eager to meet with creditors to provide them with information. Bunstine said gross margin through the five months through December was 50.25 after markdowns and shrinkage. Inventory for February may come in at about 7 percent under plan, but about 8 to 9 percent above last year. Markdowns have improved by 18.7 percent over last year, Bunstine said.
Campo said Barneys would file a motion in court today, seeking permission to purchase the assets of Barneys private label credit card business, which is not in Chapter 11. Campo refused to elaborate on the reason for the purchase.
Later, Bunstine, when asked why the credit operation wasn’t among the 21 Barneys units that filed bankruptcy, said: “It didn’t need to. It’s a completely separate company. It’s self-sufficient.” Bunstine said that financing for the credit card receivables purchase comes from a $20 million portion of the DIP carved out for the deal.
After the meeting, vendors were still frustrated and seeking answers.
“We have no hard evidence Barneys has the wherewithal to pay so we are here to get a better feeling of the situation,” said Graziano De Boni, senior vice president, finance, Hugo Boss USA Inc.
De Boni said Hugo Boss is ready to ship spring, but had not done so even though Barneys received bankruptcy court approval of $28 million in financing. Hugo Boss is owed $2.4 million.
Giovanni Mannucci, vice president, finance, Marzotto USA Corp., said his company ships under letters of credit, but was not releasing shipments until the company found out its level of protection. Marzotto is owed $1.1 million.
Mark Paulson, controller for Patti Horn Inc., 63 Greene St., a mid-sized costume jewelry firm, said all shipments to Barneys are on hold pending court approval of the entire $100 million DIP facility. “I don’t think there will be a chance we will be paid in full,” he said, alluding to Barneys’ announcement on Jan. 11, the morning after it filed for Chapter 11 protection, that all creditors would have their claims paid in full.
Robert Savage, president of Nanette Lepore, a women’s sportswear supplier at 225 West 35th St., doing $200,000 in annual volume with Barneys, said his firm has a claim of about $60,000. He complained after the meeting that there should be more representation on the committee for small vendors.
Lepore last shipped to Barney on Jan. 3, seven days prior to the filing. Savage said he had filed a reclamation claim with the company and hoped to have its goods returned or paid in full, according to the bankruptcy code. Reclamation claims provide for the return of goods or full payment on orders received within 10 days of a Chapter 11 filing.
A hat vendor with total annual sales of roughly $200,000, which did not want to be named, said it would not resume normal shipments until the entire DIP facility was approved.
At the creditors’ meeting, Peter Luboff, a principal at M. J. Whitman, a firm that invests in distressed securities and claims and is active in the Barney case, said he bought a claim Monday morning for 40 cents on the dollar.
Luboff told WWD that he has purchased six or seven claims in Barneys, some in the six figure range, but restrained from buying more because of the lack of credible financial information.
“Investors aren’t comfortable with the numbers they see from Barneys,” he said. “There’s a lot of fear right now about the credibility of the numbers. That hurts the trading of claims. People aren’t sure what Barneys is worth.”
Following the meeting, the U.S. Trustee chose a 15-member committee: Hugo Boss USA, Donna Karan Menswear, Hickey-Freeman, Isetan of America, Connecticut General Life Insurance, Travelers Insurance, Teachers Insurance and Annuity Association, Allstate Life Insurance, Republic National Bank, NatWest Bank, Protective Life Insurance Co., Chemical Bank, CIT Group, Sanwa General Equipment Leasing and BNY Financial Corp.
Diana Adams, the assistant U.S. Trustee handling the case, said more than 40 creditors offered to serve on the committee. She said she believes the trade is adequately represented. “I wouldn’t have formed it as such if I didn’t think it was fair,” she added.
— Fairchild News Service