Has Barneys New York been bailed out of bankruptcy by a “Hail Mary” that could help to circumvent a liquidation?
Sam Ben-Avraham, the fashion mogul who runs the Liberty Fairs trade show, is believed to be the only one to have signed a letter of intent to acquire the struggling luxury retailer. Because Barneys still doesn’t have a purchase agreement in hand, it’s premature to describe any suitor as a “white knight,” but sources said the retailer is in ongoing discussions with a buyer. And Ben-Avraham is said to be that buyer.
Brand management firm Authentic Brands Group also is said to be involved as it is keenly interested in the Barneys name—but largely for the retailer’s intellectual property assets. Because of that, ABG likely wouldn’t step in at this stage of the bankruptcy but could step up interest if Barneys liquidates or if a court auctions those assets.
The deadline for Barneys New York to find a buyer and avoid liquidation was supposed to have been 5:00 p.m. Thursday. The company now has until Oct. 11 to allow for additional time to give the parties a chance to negotiate and finalize a deal that would allow bankrupt Barneys to continue to operate as a going concern. Barneys is looking for a deal that’s at least $200 million.
The fact that more time might be needed isn’t exactly a surprise. That’s because any buyer would also want to make sure there’s an agreement in place with Ashkenazy Acquisition—the landlord of Barneys’ Madison Ave. location and the Beverly Hills store—that essentially renegotiates the lease terms at both locations.
The retailer has blamed a rent increase at the two locations for its financial ills. The big hit was at its Madison Ave. store where the annual rent jumped from $16 million to over $30 million. Barneys and Ashkenazy clashed over the terms connected to the increase and submitted the dispute to arbitration. An arbitrator ruled against the retailer and the landlord was able to increase the rents to an amount that was more in line with current market rates.
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At one point, it was thought that Barneys would reduce the leased space, but sources said the option didn’t really alleviate the financial pressure since most of the increase was centered on the lower floors.
Ben-Avraham is the founder of Liberty Fairs Fashion Group, which has a strong presence in the men’s and women’s contemporary fashion and lifestyle market in the U.S. In addition to Liberty Fairs, the group also operates the Cabana and Capsule trade shows. Last year, Berlin-based Premium Group, which operates trade shows in Europe, took a minority stake in the Liberty Fairs Fashion Group.
Ben-Avraham also is the founder of the trade show Project, as well as a backer of Kith. Established in 2011 by Ronnie Fieg, Ben-Avraham’s nephew, Kith is a retailer of multi-brand premium apparel and footwear, and offers its own lifestyle line for men and women.
Barneys is cutting it close on timing, given the deadlines imposed by its lenders–Brigade Capital Management and B. Riley Financial–according to the terms of the retailer’s $218 million debtor-in-possession financing facility. A date for a court-approved auction of Barneys’ assets is set for Oct. 24.
Barneys filed its voluntary Chapter 11 petition on Aug. 6 in a Manhattan bankruptcy court in White Plains.
Ben-Avraham could not immediately be reached for comment.