The fate of Barneys New York is expected to be decided by a New York state bankruptcy court on Thursday. It seemed as though a plan had been hatched earlier this month when Authentic Brands and investment firm B. Riley Financial Inc. offered to fork over $271 million in exchange for the assets of the struggling retailer, which has been trying to avoid liquidation since its Chapter 11 filing in August. However, a rival bidder – a consortium of investors led by Kith co-founder Sam Ben-Avraham – has since put forth an offer of its own, and Judge Cecelia G. Morris of the U.S. Bankruptcy Court in Poughkeepsie is expected to have the final say today.
At the center of the “tentative” deal that Authentic Brands Group LLC and B. Riley Financial Inc. reached with Barneys this month, Authentic Brands – the brand developer that maintains a wide roster of fashion and apparel companies, ranging from Juicy Couture and Judith Leiber to Jones New York, Volcom, and Aeropostale – and B. Riley would acquire all of Barneys New York’s assets. They are expected to license the Barneys intellectual property to Saks Fifth Avenue-owner Hudson’s Bay Co., which will set up Barneys-branded outposts within some of its own stores, and close all of the luxury chain’s remaining stores, thereby, letting go most of its 2,000 employees.
As the New York Times stated on Thursday, “If the $271 million bid from Authentic Brands and B. Riley is approved, the result could be eye-popping liquidation sales of luxury goods like handbags and dresses at all seven Barneys locations, perhaps starting as soon as this weekend.” Practically speaking, that would see “a surfeit of discounted merchandise in the major fashion markets of New York and Los Angeles just as the holiday shopping season arrives — and long before other stores and brands put similar goods on sale.”
While an array of media reports have reported the contrary, the Barneys, Authentic Brands/B. Riley deal is hardly set in stone. As of late this month, a new offer was put on the table by retail investor Sam Ben-Avraham, who has been vocal about his plans to keep a few key Barneys outposts open and “save” the legacy of the nearly 100 year old shopping institution. According to the Wall Street Journal, which cited filings from counsel for the official creditors committee on Wednesday, Ben-Avraham’s rival bid “was neither higher nor better than the Authentic Brands’ bid by the time of the bid deadline last week,” but separate reports suggest that the group might be working on a new bid.
Still yet, despite the official cut off for bids tolling last week, a slew of new names are emerging. Reuters reported on Tuesday that a group of Saudi and Gulf investors had partnered with investment group Solitaire Partners to make a bid for Barneys worth in the “area of $270 million.”
Solitaire’s chairman David Jackson, who is also the former CEO of Dubai-based Istithmar World, which acquired Barneys in 2007 for $942 million, confirmed to the New York Post that he plans to make a play for the retailer in conjunction with Arabian Oud, a Middle Eastern perfume giant.
“We still believe there is a window for us on the 31st to submit a fully funded proposal and write a check on the spot,” Jackson said on Tuesday.
UPDATED: Judge Morris formally approved Authentic Brands/B. Riley’s offer on Thursday morning. However, the deal – which counsel for Barneys told the court will almost certainly see the Authentic Brands opt to close all remaining Barneys brick-and-mortar locations – is not entirely done. According to the WSJ, “The judge’s decision leaves open the slim possibility that a rival purchaser could come forward before the sale closes Friday morning with a higher or better offer that would keep more stores open and the business intact.”
Joshua Sussberg of Kirkland & Ellis, who is representing Barneys, said in court on Thursday that “while there’s a possibility that some of the stores may stay open [in accordance with Authentic Brands’ plan], it’s likely that five locations and its distribution center will close and thousands of jobs will be lost; that is why we have continued discussions with other parties,” prompting Judge Morris to call Thursday a “sad day.”
Ultimately, two additional entities – Jackson and Solitaire Partners, as well as Tengram Capital Partners, a private-equity firm – were vying for Barneys’ assets, Sussberg confirmed on Thursday.