Sources have told The Wall Street Journal that Barneys New York is preparing to file for bankruptcy protection.
Barneys, which has 13 department stores and nine warehouse stores, will have to immediately shut down most of its locations and look for a buyer for seven core stores, according to the restructuring plan.
The sources added that the company is close to finalizing a deal with Gordon Brothers and Hilco Global for a 60-day loan that will give the luxury retailer time to find a buyer. If Barneys cannot reach a deal, it will be forced to liquidate. The company currently has about $200 million in debt, according to the report.
“The Barneys New York board and management continue to work constructively and collaboratively with a number of parties and are committed to reaching a mutually agreeable resolution to strengthen our business,” a Barneys spokesman said Monday (Aug. 5).
Barneys’ existing lenders Wells Fargo and TPG Sixth Street Partners are in discussions to allow the company to take the loan. There is still the possibility that the deal will fall through.
Just last week, it was reported that Barneys had been hoping for a path to avoid bankruptcy amid a cash crunch brought on by spiking rents at its Manhattan flagship location. However, options other than bankruptcy restructuring became unlikely after a financing deal fell through, leaving the company to raise debtor-in-possession financing to help support its business through bankruptcy.
Barneys, with roughly $850 million in annual sales, also extended the term of its credit line by $50 million in April. That agreement, however, has not been sufficient to stem the losses, and it looks as though the retailer is running out of options.
This impending filing would be the second time Barneys has visited bankruptcy court; it filed for protection from creditors in 1996. It also avoided bankruptcy in 2012 when Perry Capital, one of its lenders at the time, took majority ownership of the company.