Finding a buyer willing to acquire bankrupt Barneys New York appears to be a tall order, but if the luxury retailer’s two top executives can accomplish a sale–under certain conditions–they’ll be compensated for their efforts.
A bankruptcy court judge approved the request on Wednesday for CEO Daniella Vitale and chief financial officer Sandro Risi to share a $1 million bonus if they succeed in selling the luxury retailer above its “floor value” of about $200 million to $250 million, which includes the secured debt under the debtor-in-possession financing facility and funding to pay administrative and priority claims.
There’s room for the bonus to increase if certain conditions and metrics are met.
According to an affidavit filed with the Manhattan bankruptcy court, Barneys chief restructuring officer Mohsin Y. Meghji said that once a sale agreement has closed, Vitale would be paid 60 percent and Risi 40 percent of the $1 million, each receiving a single lump-sum cash payment.
Meghji called the structure of the incentive plan a “reasonable, market-based approach” to motivate the executives to maximize the company’s value in a sale. And he noted that the structure benefits creditors because it ensures that many unsecured claims, including those held by employees and trade creditors, would be paid before the executives’ interest in the bonus can vest.
Barneys, which generated about $800 million in revenues in 2018, filed a voluntary petition for Chapter 11 bankruptcy court protection on Aug. 6. The filing wasn’t exactly a surprise as rumblings about liquidity issues had surfaced on and off for the past year or so, largely in the aftermath of an annual rent hike in January that saw the outlay for its Madison Ave. flagship nearly double to $30 million from $16 million.
Under the terms of its DIP financing agreement, Barneys must secure a buyer by Oct. 24 or face the prospect of liquidation.