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Barneys Secures Enough Financing to Pay for Its Inventory

Bankrupt Barneys New York has received court approval on its $218 million debtor-in-possession financing facility.

The approval was granted on Wednesday by Bankruptcy Judge Cecilia Morris in a Poughkeepsie bankruptcy court.

According to an affidavit from Saul Burian of Houlihan Lokey, Barneys’ financial advisor, the final facility agreed to by Barneys, its lenders and the unsecured creditors’ committee included an adjustment to two key components. First, a reduction in the enhancement fee to 25 percent of the sale proceeds, which becomes payable only under certain conditions, including $8 million available to satisfy unsecured creditor claims, and an increase in the size of the Consignment Facility to $40 million from $30 million.

The adjustments were critical to satisfy the unsecured committee’s concerns that Barneys didn’t have enough to operate through the next two months.

The $218 million facility from Brigade Capital Management and B. Riley Financial included payment $189.8 million to its existing secured lenders, leaving about $28.1 million left for operations. By the time one added up certain fees, that only left about $18 million for operations, including securing inventory to restock the retailer’s shelves. With a larger consignment facility, Barneys gets an additional $10 million availability for inventory purchases.

Barneys filed a voluntary Chapter 11 petition on Aug. 6. It said at the time that it would shutter 15 stores. Now the priority for the luxury retailer is to find itself a buyer. A date for a court-approved auction of Barneys’ assets is set for Oct. 24.