Sep 2, 2009
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Barneys restructuring not seen imminent

Sep 2, 2009

NEW YORK, Sept 2 (Reuters) - U.S. luxury retail chain Barneys New York [DBWLDB.UL] is not considering an imminent restructuring of its business, but is looking into its options as consumers still hold tightly onto their wallets ahead of the upcoming holiday shopping season, a person familiar with the company's thinking said on Wednesday 2 September.

While the company and its owners, Dubai's Istithmar World Capital, are looking at various possibilities nothing is seriously being considered at this time, this person said.

Barneys hired restructuring advisory firm Perella Weinberg just weeks ago to help it mull options that would shore up its financial position.

The company may consider options including a debt-for-equity swap with its largest bondholder, hedge fund Perry Capital LLC, further financial support from Istithmar, an asset sale, or a possible bankruptcy filing, but no one course of action has yet been decided upon and it may decide not to do anything at all, this person said.

Barneys, with stores in cities like New York, Chicago and Beverly Hills, has struggled in the recession as even wealthy consumers have cut back on spending.

"Like other retailers in the luxury segment, Barneys is facing very challenging market conditions," Istithmar said in a statement on Tuesday 1 September. "The Company continues to work aggressively to improve its financial position, including implementing expense reductions, appropriate inventory and working capital management, and prudent capital controls. The Company's liquidity position is sufficient and it is in compliance with all its credit agreements."

Despite recent media reports that Holt Renfrew, a Toronto-based department store chain, may be interested in buying the company, no decisions have been made at this time about whether Barneys would consider selling itself, this person said.

A Holt Renfrew spokesperson declined to comment.

Istithmar World said in its statement on Tuesday 1 September that it is working to improve Barneys' financial situation and is "fully committed" to the retailer despite challenging market conditions.

Istithmar, a unit of Dubai World [DBWLD.UL], bought Barneys for $942 million from Jones Apparel Group (JNY.N) in 2007. It provided some additional funding to the chain in April, allowing it to pay for its shipments for the rest of the year.

The acquisition left Barneys with about $660 million in debt, according to Reuters data, which it has been struggling with during the recession. Standard & Poor's had cut its ratings on Barneys to a deeply distressed level in April, warning about a "deteriorating liquidity position" at the company.

Many U.S. retailers are in similar positions, facing heavy debt loads and reduced consumer spending this year. Retailers, however, typically wait until after the holiday season to decide on any restructuring plans, as a large percentage of their annual income tends to arrive during the fourth quarter shopping season. (Reporting by Emily Chasan; Additional reporting by Aarthi Sivaraman; Editing by Tim Dobbyn)

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