Print | Share | Reprint

Lenders take the keys to Barneys closet

by Richard Collings and Vyvyan Tenorio | Published May 8, 2012 at 12:03 PM

Barneys New York Inc.'s largest lenders, Perry Capital and Yucaipa Cos., are its new owners after agreeing to a months-long, out-of-court restructuring. The debt-for-equity swap, which the retailer announced Monday, May 7, removes $540 million of Barneys' debt, leaving only $50 million of debt on its balance sheet.

Perry Capital, which held about 58% of a $268 million senior secured term loan, agreed to put in $200 million of new equity in return for a roughly 72% shareholding. Yucaipa, holding 37% of the term loan, received a payout in excess of $100 million. Of this the Los Angeles private equity firm reinvested about $40 million in return for a 20% interest in Barneys, according to sources familiar with the transaction.

The restructuring wiped out the equity held by majority owner Istithmar World PJSC, a private equity unit of Dubai's state-owned Dubai World. But Istithmar also held certain pieces of the long-term debt, including a $7 million loan, which were rolled over into new equity.

Yucaipa also owned 66% of the $315 million mezzanine tranche, and Perry Capital owned the rest. Yucaipa owned 66% of the mez, Perry Capital held the balance.

Istithmar had not disclosed its total equity exposure to New York-based Barneys prior to the restructuring, but according to one source, it had invested about $30 million in additional equity since the buyout.

Istithmar purchased the retailer for $942.3 million at the peak of the buyout boom in 2007, when it topped a competing bid for the asset with a substantially higher offer than its original bid. Barneys was owned by Jones Apparel Group at the time.

When the financial crisis hit in 2008 and consumers snapped their wallets shut, the high-end retailer found itself in trouble.

Perry Capital and Yucaipa became interested in Barneys in 2009, with Perry Capital taking the role of lead sponsor. The two eventually purchased the debt from Citigroup at steep discounts.

By reducing its debt, Barneys frees up cash flow to focus on renovating its stores, investing in Barneys.com, and perhaps continue with its expansion through new stores.

According to the announcement, Barneys delivered double-digit comparable store sales growth and a 40% increase in Ebitda in calendar 2011 over 2010.

That Barneys was able to skirt a trip to bankruptcy court "was huge," said one source who declined to be identified. "It reflected the constructive work between Perry Capital and Istithmar, and between Perry Capital and Istithmar together and Yucaipa on the other."

It isn't clear whether Barneys management will own equity stakes.

Barneys was advised by Richard Shinder and Shana Randhava at Perella Weinberg Partners LP, which also assisted with the retailer's restructuring in 2009. Barneys took legal counsel from Kirkland & Ellis LLP's Paul Basta, Joshua Sussberg, Leonard Klingbaum, Brian Schartz and Jason Chien.

Perry Capital was advised by Houlihan Lokey and a Simpson Thacher & Bartlett LLP team that included Mark Thompson, Gary Horowitz, David Eisenberg, Steven Todrys and Greg Ressa.

Yucaipa was advised by Lazard and Skadden, Arps, Slate, Meagher & Flom LLP's Ken Ziman and J. Eric Ivester.

Istithmar was advised by Blackstone Group LP and Willkie Farr & Gallagher LLP.

Share:

Tags: Barneys New York Inc. | debt financing | M&A | Perry Capital | Yucaipa Cos.

Restructuring

Lenders take the keys to Barneys closet

Free preview

Meet the journalists

Richard Collings

Senior Writer: Consumer Products & Retail

Movers & Shakers

Video

Coming back for more

Sectors