Luxury retailer Barneys New York is preparing for a petition for bankruptcy, which could go to CNBC later this month.
Barneys faces a liquidity crisis triggered by a rent hike Manhattan flagship, law firm Kirkland & Ellis and financial advisor has hired an M-III partner to help with the potential preparations, the people said. The advisors are currently examining a range of options that include bankruptcy, as well as options that help prevent insolvency, such as selling or securing additional funding.
People warned that Barneys is currently considering bankruptcy Insolvency is far from certain.
A Barneys spokesman told CNBC, "At Barneys New York, our clients are our top priority and we commit to providing them with the outstanding services, products and experiences they can deliver." The spokesperson added, "Our Board of Directors and our management are actively exploring ways to strengthen our bottom line and ensure the sustainable, long-term growth and success of our business."
Barneys is just one of many department stores that are struggling to buy buyers now online or directly at brands. Nordstrom is trading at nearly $ 20 per share under a share buyback offer of $ 50 per share, which was rejected as too low two years ago. The Hudson's Bay Company, owner of Saks, is considering becoming private after its shares fell nearly 50% in the year to June. Macy's shares fell 40% last year.
Department stores are also struggling to make up for declining sales and an expensive store base, which includes more than 1
Manhattan has proven particularly stressful.
The rent at Barney's flagship on Madison Avenue, owned by the Ashkenazy Acquisition Corp increased from about $ 16 million to about $ 30 million CNBC previously reported that January was its earnings before interest, taxes and depreciation almost wiped out.
Many retailers in Manhattan's Midtown invested in their properties when retail was stronger, either by buying at high prices or by taking large loans based on high valuations. The rent they charge reflects these ratings. With the retail industry struggling and sales slumping, the breakup has hurt both the tenant and the landlord.
Ralph Lauren closed his Fifth Avenue store in 2017, while Lord & Taylor closed its Fifth Avenue flagship in January.
Barneys, with a turnover of around $ 850 million, extended its term of credit in April in the hope of a $ 50 million lifeline. However, the credit agreement with existing lender Wells Fargo and new lender TPG Sixth Street Partners was not enough to offset the losses.
Barneys has been supported since 2012 by Perry Capital, the fund led by Richard Perry. Perry Four years later, he closed his fund, citing the headwind of the industry and the market.
Perry Capital has existed largely as a "zombie fund" in which Barneys has invested but no longer invested.
Barneys dates back to 1923 when Barney Pressman opened a discount clothing store for men on Seventh Avenue and 17th Street. In the 1960s, Barney's son Fred helped transition from a discounter to a luxury retailer. Barneys soon coined New York's luxury fashion, building on her position in menswear and introducing designers like Giorgio Armani.
People asked for anonymity because the information is confidential. M-III did not immediately respond to a request for comment. An off-hours message was not returned to Perry Capital.
Reuters first reported the possible insolvency plans.