UPDATE: Barneys New York revealed it has secured new financing of $218 million from Brigade Capital Management, LP and B. Riley Financial, Inc., replacing the previously announced $75 million initially offered by Hilco Global and the Gordon Brothers Group. The retailer can gain immediate access to $75 million of the new loan, upon approval from U.S. bankruptcy court. The loan will enable the department store to pay its vendors and employees “and conduct a sale process to position Barneys New York for the long-term,” Barneys CEO Daniella Vitale said in a statement. The luxury department store has until Oct. 24 to find a buyer and avoid liquidation, according to CNBC.
Barneys New York has filed for Chapter 11 bankruptcy, securing $75 million in emergency financing from affiliates of Hilco Global and the Gordon Brothers Group. The loan would keep the 96-year-old luxury department store afloat throughout bankruptcy for 60 days while it attempts to strike a deal with a buyer, according to The Wall Street Journal. If Barneys cannot reach a deal, it will liquidate, the report said.
Reports surfaced last month saying the luxury retailer was examining strategic alternatives, which included a potential bankruptcy, sale or securing further financing. Barneys carries approximately $200 million in debt, and already received a $50 million lifeline in April after rent at its Madison Avenue flagship jumped from $16 million to $30 million in 2019.
As part of the filing, Barneys will close 15 stores in total: locations in Chicago, Las Vegas and Seattle, along with five smaller concept stores and seven Barneys Warehouse locations. The flagships at Madison Avenue, Downtown New York, Beverly Hills, Calif., San Francisco and Boston will remain open, as well as two Warehouse stores. Barneys.com and BarneysWarehouse.com will continue operating without disruption.
Barneys is much smaller than rivals Saks Fifth Avenue and Neiman Marcus, each of which operate approximately 40 department stores. Barneys, like many of its peers, is struggling to combat the rise of luxury brands that sell directly to their shoppers rather than go through a department store. Additionally, the growth of high-end e-Commerce sites such as Farfetch and Yoox Net-A-Porter have given consumers a favorable online luxury experience — one that most traditional luxury brands have been unable to replicate on their own.
Danielle Vitale, CEO and President of Barneys New York, specifically pointed out the “challenging retail environment and rent structures that are excessively high relative to market demand” as having a dramatic impact on the business.
Barneys is just one of several retailers suffering from rising rents on flagship stores in New York City: Gap closed its NYC flagship in January; L Brands shuttered all 23 Henri Bendel stores, including the brand’s NYC flagship; Hudson’s Bay Company closed and sold off its Lord & Taylor Fifth Avenue flagship in January; Calvin Klein closed its Madison Avenue flagship in January; and Ralph Lauren closed its Fifth Avenue store in 2018.
This is the second bankruptcy for Barneys. The first filing was in 1996 after a dispute with its then-owner, Japanese department store Isetan. The filing was partially a move to renegotiate its deal with Isetan, all while maneuvering through what it viewed as excessive rent.
Barneys avoided a second bankruptcy in 2012 when Perry Capital, a hedge fund run by New York financier Richard Perry, took control of the company through a $540 million debt-for-equity swap. While the fund closed in 2016, it has owned Barneys ever since, but has not put more money into the company.