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Barneys may be investigating bankruptcy proceedings in July, seizing Manhattan lease



Luxury Dealer Barney's New York is preparing for a bankruptcy proceedings that can come as soon as this month, people who know CNBC's case tell.

Barneys, facing a liquidity cream, Manhattan flagship, has engaged law firm Kirkland & Ellis and financial advisers an M-III Partners to help with the possible preparations, the people said. The advisers are exploring a number of options that include bankruptcy, as well as those who will help avoid bankruptcy proceedings, such as selling or securing additional funding, the people said.

The people therefore warned that while Barney's is exploring a bankruptcy filing, one is far from certain.

A Barneys spokesman told CNBC: "At Barneys New York, our customers remain our top priority and we are committed to providing them with the good services, products and experiences they have come to expect." The spokesperson added that "our board and management are actively considering the opportunities to strengthen the balance and ensure sustainable, long-term growth and success in our business."

Barneys are just one of many department stores that are struggling as buyers buy online or from brands directly. Nordstrom trades almost $ 20 per share lower than a $ 50 share buyout offer it declined two years ago as too low. Case owner Hudson & # 39; s Bay Company is considering going private after stocks fell nearly 50% in the year to June. Shares in Macy are down 40% over the past year.

Department stores are also struggling to balance declining sales and a costly store base, which for Barneys includes more than 1

0 nameshops in New York, California, Chicago, Massachusetts, Las Vegas, Seattle and Pennsylvania.

Manhattan has proved particularly troublesome.

Renting at Barney's flagship on Madison Avenue, owned by Ashkenazy Acquisition Corp. jumped from around $ 16 million to about $ 30 million in January, almost eradicating its earnings before interest, taxes, depreciation and depreciation, CNBC reported earlier.

Many landlords in Manhattan in Midtown made investments in their property when retail was stronger, either by buying at high prices or taking out large loans based on high valuations. The rent they charge is a reflection of these valuations. As retailers have turned and sales have declined, the link has damaged both the tenant and the landlord.

Ralph Lauren completed his 5th Avenue store in 2017, while Lord & Taylor closed the flagship Fifth Avenue in January.

Barneys, who has about $ 850 million in sales, extended the credit card term to $ 50 million in April, hoping for a lifeline. Nevertheless, the credit agreement with existing lender Wells Fargo and the new lender, TPG Sixth Street Partners, has not been enough to seep the losses.

Barneys has been supported by Perry Capital, the fund run by Richard Perry since 2012. Perry

Perry Capital has since largely existed as a "zombie fund", where it has owned Barneys, but has not put more money into it .

Barneys dates back to 1923, when Barney Pressman opened a men's discount clothing store on Seventh Avenue and 17th Street. In the 1960s, Barney's son Fred helped transition from a discount store to a luxury retailer. Barneys soon made its mark on New York's luxury fashion, built on footwear in men's clothing and introduced designers like Giorgio Armani.

People asked for anonymity because the information is confidential. M-III did not immediately respond to a request for comment. A message left with Perry Capital out of working hours was not returned.

Reuters first reported possible bankruptcy plans.


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