Luxury department store chain operator Barneys New York filed for bankruptcy protection on Tuesday. The company also announced that it would be putting itself up for sale to investors interested in taking over its operations.
The New York-based retailer was pushed to the decision after it saw its revenues fall, mainly due to increased competition in the digital space and the rising cost of rent at its various stores in the US and abroad.
As part of its bankruptcy protection deal, the company announced that it would be closing around 15 locations in an effort to further reduce operational costs. The company has also been given until the end of October to find a buyer.
If it fails to find someone interested in acquiring it, the company will be forced to begin the liquidation of its assets, which will effectively kill the brand for good. As of the moment, no parties have expressed interest in acquiring the company.
To help it deal with the fallout of bankruptcy, Barney was able to close a deal on Tuesday with Brigade Capital Management LP and B. Riley Financial Inc.
Both companies have agreed to lend the retailers $218 million in cash, which it will use to repay existing loans and to help it continue its operations while it looks for a suitable buyer. The US Bankruptcy Court reportedly assisted in closing the deal and allowed Barney to use at least $75 million of the amount for its operations.
According to bankruptcy-court papers filed Tuesday, Barney currently owes substantial amounts to companies such as Canada Goose, Gucci, Prada, and Yves Saint Laurent. The filing comes as a big surprise to most given that the fashion brand has been in operation for close to a century.
The retailer, which was originally founded in 1923, currently employs around 2,300 people in the US and abroad.
The company has around 15 flagship stores in the US and dozens of stores overseas, including 12 stores in Japan under a franchise agreement.
Several factors that were seemingly out of the company's control had led to its downfall. For one, the company had to deal with a steep rent hike in one of its Manhattan flagship stores on Madison Avenue.
Rent for the particular space increased from $16 million a year to roughly $30 million a year.
Another contributing factor that caused a cash crisis within the company involved its various vendors, which had decided to halt shipments unless Barney's agreed to pay them in cash on delivery.
This caused quite a big problem within the company's inventory systems. Companies such as Moncel and Hilldun stopped approving orders a few months ago unless Barneys agreed to their terms.
