What to Know Ahead of Bankrupt Barneys’ Sale Hearing

Mere hours precede Barneys New York’s sale hearing on Oct. 31, when a judge is expected to make a final decision about the bankrupt luxury retailer’s new ownership.

While Authentic Brands Group is expected to complete its purchase of Barneys’ intellectual property, there is still room for Kith investor Sam Ben-Avraham to swoop in with a qualified bid.

In a filing today with the U.S. Bankruptcy Court in the Southern District of New York, the committee of unsecured creditors noted that Barneys received two bids “to acquire substantially all of [its] assets” prior to last week’s bid deadline. It named ABG along with B. Riley Financial and Ben-Avraham as the two bidders.

The brand management company, which submitted a liquidation bid, has been designated the stalking horse. On Oct. 16, a filing with the bankruptcy court stated that Barneys had entered into an agreement to sell its assets to ABG and B. Riley in a cash deal estimated at roughly $271.4 million.

As part of the transaction, ABG intends to shutter all of the retailer’s seven existing stores, including the Manhattan flagship on 660 Madison Avenue, and license the name to Saks Fifth Avenue, which will create private-label merchandise and build shop-in-shops inside some of its locations.

ABG also plans to grow Barneys’ presence through high-fashion collaborations and namesake products, as well as expand it in key international markets, particularly in Asia, where it would be able to build on the success of the chain’s current stores in Japan.

On the other hand, Ben-Avraham’s going-concern bid seeks to keep open at least five flagship stores, two outlets and the distribution center, as well as save thousands of jobs and hundreds of vendor partnerships. However, in today’s filing, Barneys’ unsecured creditors’ committee stated the Kith investor’s proposal was “neither a higher nor better bid” than that of ABG and thus unable to be deemed as a qualified bid.

“In theory, when a deadline passes, that’s the end of it,” explained Eric Snyder, a partner at New York-based law firm Wilk Auslander. “But in practice, sometimes the courts are a little more flexible.”

If a higher or better bid emerges before the sale hearing, the committee wrote that it would evaluate the proposal and seek to have it considered and approved by the court.

“From the outset of these cases, the committee has been pushing to keep Barneys alive as a true going-concern business with a maximum retail footprint,” wrote the group of unsecured creditors. “At this time, there is no other bid to consider, but the committee is aware that [Ben-Avraham] has been working to improve its previously submitted bid to continue Barneys as a true going-concern iconic retailer.”

It added, “In the event that [Ben-Avraham] (or any other party) submits a bid prior to or at the time of the sale hearing, the committee reserves the right to fully consider such bid(s), and to support the bid that it determines to be the highest or otherwise best bid.”

FN has reached out to both ABG and Ben-Avraham as well as Barneys for comment.

Barneys filed for Chapter 11 bankruptcy protection more than two months ago, but it managed to secure $218 million in financing that allowed it to maintain operations. The retailer has struggled amid skyrocketing rents and shifting consumer demands that have weighed heavily on its margins, particularly in Manhattan, where the Madison Avenue flagship has stood for nearly a century.

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