Barneys took on debts of about $500 million to fund the purchase. Since then, economic woes have crimped Barneys' sales, and it has been without a CEO for the past 18 months.

Istithmar now is exploring a possible Barneys restructuring, with the retailer tapping investment bank Perella Weinberg Partners to advise it. One approach typically taken in such situations is to wipe out company equity, while delivering control to debtholders.

Hedge-fund manager Richard Perry is expected to be the key player in any negotiations; his hedge fund holds a controlling position in Barneys' senior debt. "There are conversations, but no process," said one person familiar with the matter, adding not to "expect anything imminent."

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.

"I believe Barneys was strong enough to survive without the support, but because vendors and factors were nervous we elected to put some more capital in to help decrease their level of concern," David Jackson, chief executive officer of Istithmar World Capital, the parent of Barneys, told WWD.

Jackson would not confirm the $25 million report, but he did characterize the level of support as "significant," adding, "In this environment, where everybody is hoarding cash, we are trying to send a signal that we are supporting the business."

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Earlier, Jackson released a statement that, "Istithmar World Capital has provided a significant level of additional capital to support Barneys New York. Working closely with management, we believe that this amount allows the company financial flexibility to work with the company's major vendors and financial intermediaries. The plan enables the company to meet its 2009 schedule of shipments. We will continue to monitor the company's performance but we are confident that no further injection is needed at this time."

In addition to battling the recession, sharp declines in luxury spending, and lately a handful of factors — including Hilldun Corp. and Rosenthal & Rosenthal Inc. — that have stopped approving shipments, Barneys has been dogged by speculation that Istithmar wants to unload the business amid mounting financial pressures. But on Monday, Jackson went on the defensive, flatly denying the for-sale rumors and even contending Barneys is outperforming the competition.

"There are a lot of rumors about Barneys, about what's going on. All of these are unfounded and unwarranted," Jackson said. "Barneys is owned by Istithmar and will continue to be owned by Istithmar and will do everything it can to protect that investment. "I would say most of those [factor] inquiries are general things, about the overall health of the industry.... Some of the requests coming from factors are unwarranted."

So what do the factors want? "Some of it is as simple as providing some information; some things are more tangible in terms of support," meaning financial support. Asked how many factors are at issue, Jackson replied, "Management has indicated to us there are four or five conversations they want us to have. I most want to put to rest any concerns that these factors have so Barneys' management can focus on running the business and not on idle speculation about the financial strength of Barneys or concerns about Istithmar standing behind Barneys," added Jackson.

The financial vise is tightening on Barneys New York, with some factors no longer approving spring orders as a result of uncertainties over the luxury chain's future. Barneys' costly expansion of the past three years has failed to gain traction; the retailer has been without a chief executive officer since last July, and the severe downturn in retailing, particularly the luxury sector, has hit the retailer and its cash flow hard. Its owner, Dubai-based Istithmar, has been quietly trying to sell the chain at a price no one wants to pay as the Middle Eastern emirate faces its own economic meltdown. All those factors are making certain vendors and suppliers skittish over Barneys and less inclined to take risk, though the luxury chain appears current on its bills.

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Meanwhile, executives at major fashion houses said they are continuing to ship to the store. "Barneys is current [on its payments] and shipable," said Patrick Guadagno, president of Versace in the U.S. "It's business as usual." One sportswear designer who requested anonymity said the store paid this season. Major stores have been good on their payments, but some smaller independent retailers are facing challenges in paying, the designer said. Executives at many smaller fashion firms said they, too, were getting paid, although at least one said payment was slower than usual.

One factor said a temporary halt on approving spring orders has more to do with wanting to know what Barneys' owner has in mind for the future of the chain. He explained that, essentially, factors just want to know "how much ongoing support Barneys will get from Istithmar going forward." If the information is satisfactory, orders will start being approved in March, factors said.