In an effort to get the ailing retailer back on track, the Dubai-based owners of Barneys have hired an asset management company to restructure the company's debt. Istithmar World Capital has also infused $25 million into the company to allow shipments of merchandise and to allay fears that Barneys wouldn't be able to pay its bills.
Now Barneys is moving to further ease the financial pressure, tackling a 500-pound gorilla. On Tuesday, Perella Weinberg Partners, an asset management company, was hired to help restructure the retailer's debt. On the books, there is about $500 million in long-term debt, including a $270 million term loan maturing in 2014 and a mezzanine loan of about $230 million maturing in mid-2016. There also is revolving credit debt, which, based on available working capital, varies from month to month and matures in 2012. The balance is currently $80 million. Barneys' lead banks are Citibank, Wells Fargo and HSBC.
Interest costs, depreciation and sales declines put Barneys in the red last year on a net basis, though the chain made money on an earnings before interest, taxes, depreciation and amortization basis. As for 2009, the company, with seven flagships, two regional stores, 19 Co-ops, 13 outlets and three warehouse sale locations, is projected to reach sales of about $675 million, down from $750 million last year, but generate a small operating profit.
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Like other retailers, particularly those purveying luxury, Barneys has been deeply impacted by the recession. However, the store's current management structure — without a chairman, ceo or chief operating officer — makes it unique.
Instead, a senior operating committee, comprising the chain's seven executive vice presidents, is running the show. They represent the top tier inside the chain and are all veterans of the organization, with anywhere from 13 to 30 years' tenure. The committee meets weekly, usually Tuesday mornings, in the 11th-floor conference room at Barneys headquarters at 575 Fifth Avenue in New York, to tackle anything from cost cutting, sales trends and merchandise receipts to advertising or when to break into sale mode. A formal agenda for each meeting is prepared by the chief financial officer with input from the other executives. After going through the agenda, each executive vice president can bring up any significant matter pertaining to his or her area of responsibility.
It's unheard of for a major retailer not to have a CEO to run things, but the Barneys execs are soldiering on. Right now the company is focusing on the opening of its eighth flagship store in October in Scottsdale, Arizona. The store will be expensively decorated, with stone and mosaic floors, a dramatic staircase and Fred's restaurant (pictured above).
