A bidding war may be about to begin for Barneys New York, the beleaguered luxury department store that declared bankruptcy in August and became a cautionary tale of retail and the death of shopping as we once knew.
One buyer may mean liquidating all of the retailer's stores, while another could retain at least some of Barneys customers today.
On Tuesday, Authentic Brands Group, the owner of over 50 brands including Nine West, Nautica and Hickey Freeman, made a formal $ 264 million offer for Barneys that was accepted by the store's lenders. An auction process is set to begin next week. At least one other bidder has declared intent: a consortium of New York investors led by Sam Ben-Avraham, co-founder of streetwear brand Kith and owner of a group of trade shows.
The bankruptcy judge, Cecelia G. Morris, will decide her order on the bids on October 24.
ABG, which has an annual revenue of $ 10 billion, has an agreement with Hudsons Bay Company, the owner of Saks Fifth Avenue, to license Barney's name if it buys the dealership. According to documents reviewed by The New York Times, A.B.G. plans to continue operating Barney's digital operation, while Saks will potentially use the Barneys name for private label collections or shop-in stores. Saks' commitment will give a glimmer of innovative luxury to the Fifth Avenue retailer, so it can further consolidate power over the luxury department store.
While A.B.G. has said it will try to keep Barney's stores open, especially Madison Avenue's flagship, and is prepared to close all seven of them if better leases can't be achieved. It has already set up the Great American Group to conduct liquidation sales. There was nothing mentioned in the offer about what would happen to current employees.
A.B.G. focuses primarily on the future of retailing being based on the abstract values of brand names rather than shopping experiences.
Mr. Ben-Avraham and his group, which includes brother Uzi Ben-Abraham (owner of the real estate company Premier Equities); Ron Roman (Bergen Logistics); Khajak Keledjian (founder and former CEO of Intermix); Ron Burkle (Yucaipa Companies, the private equity firm that is already an investor in Barneys); and Andrew Rosen, plan to keep at least two of the remaining seven Barneys stores open, including the Madison Avenue flagship with its nine-story footprint. It will retain at least some of the current management.
In an interview, Mr. Ben-Avraham said that a team was in negotiations with all of Barney's landlords, although no agreements have been reached. He said his group had raised $ 70 million in equity, with plans to raise up to $ 150 million, and had secured at least $ 200 million in debt financing.
chic will create a new type of community destination. "Our specialty is creating environments people want to be a part of," he said.
Originally rumored to be the first, or so-called stalk horse, bidder, Ben-Avraham said he had decided to wait until he had all his funding in place. He said he was keen to try to save the brand, which he called one of his "inspirations."
Barneys attorneys are still working to finalize a deal with the first formal bidder on Tuesday, according to a 10-minute hearing at the Poughkeepsie, NY bankruptcy court. Attorneys said they were working with buyers to "keep the option open" for a bid which would avoid liquidation and preserve jobs. They also said that it was possible for certain stores to continue operating under the terms of the original bid.
"We plan to work through the remaining issues soon so we can have a signed purchase agreement as soon as possible," a Barneys attorney said during the hearing. "These are not easy negotiations, and there is a lot of attitude and pressure going on, but our options are relatively limited at this time."
Neither ABG, run by its founder, Jamie Salter, nor Mr. Ben-Avraham has experience in operating large department stores.
ABG, which bought Sports Illustrated's intellectual property for $ 110 million in May, has built a global business of managing brand names, including celebrity estates Elvis Presley and Marilyn Monroe. In 2016, it went with mall owners Simon Properties and General Growth and two liquidators to buy Aeropostale out of bankruptcy, a deal that could serve as a model for the proposed Hudson's Bay scheme.
A.B.G. recently sold the right to publish Sports Illustrated to a digital company, which laid off a significant percentage of the publication's employees this month.
Mr. Ben-Avraham began his career in the mid-1990s with specialty store Atrium, a store that sold Nudie jeans alongside Ralph Lauren, before founding Kith in 2011 with designer Ronnie Fieg. It is both a multibrand retailer and one of the best known streetwear lines.
Barneys was founded by Barney Pressman in 1923. Over the course of three generations of family ownership, it evolved from an affordable man's place of success to a symbol of a certain type of New York style: undoubtedly elitist and very expensive. It grew to include women's clothing, home and children's clothing, and was famous for its ranks of black clothing and the ability to crown rising fashion stars.
However, he became a victim of his own myth-making and, however, declared bankruptcy in 1996. changed hands several times after that, and was sold in 2012 to Richard Perry and his hedge fund, Perry Capital. Perry is believed to have been an absentee owner in recent years, and has not been involved in bankruptcy proceedings despite having a 72 percent stake in the company and a seat on the dealer's board.
Mr. Perry closed its hedge fund in September 2016 and has returned the vast majority of clients' money; Barneys is one of the remaining investments it is working to relax. Josh Hechinger, a spokesman for Mr. Perry, declined to comment.
Barneys reported sales of around $ 790 million last year, and 30 percent of that came from e-commerce, according to bankruptcy filing. The company, which had 2,300 employees when it filed for bankruptcy, said the 15 stores it planned to close posted losses of $ 14.2 million last year.
The luxury chain's challenges came to a head this year, culminating in "a liquidity crisis" over the summer. Rent commitments jumped $ 12 million as sales plummeted and sellers began to refuse to ship inventory unless they were paid cash on delivery, according to the retailer
Whether such concerns are resolved by potential new owners' plans is an open question, others mentioned as potential bidders include Hilldun Corporation, the fashion finance company, and Mercury Group, a Russian retail and real estate group that owns the TsUM department store and auction house. Phillips, according to two people with knowledge of the plans, who said they were not authorized to speak publicly.