Barneys is so broke it doesn’t have enough money to pay for many of the designer handbags, shoes and other items it’s now selling at bargain-basement prices, The Post has learned.
Despite having sold itself to licensing firm Authentic Brands Group for $271 million last month, the posh department store chain is “massively” insolvent, steamed vendors revealed in court papers filed this month.
And the NYC company’s cash-flow problems are expected to hurt some of the world’s most esteemed suppliers of luxury goods, including Yves Saint Laurent, Gucci, Prada, Celine and Balenciaga, which will likely receive nothing for the goods that Barneys had in its stores right before it filed for bankruptcy on Aug. 6, court documents show. Vendors that sent their lux goods to Barneys after it filed for bankruptcy will be lucky to get 40 cents on the dollar, the papers claimed.
Yves Saint Laurent and Balenciaga could be out $2.2 million each. Gucci is owed $1.8 million, while Prada is demanding $1.6 million, court papers show.
Peeved vendors are now objecting to Barneys’ plan to wind down its business and exit bankruptcy — claiming that there’s not enough money to pay them what they are entitled to under bankruptcy law.
Barneys “became deeply administratively insolvent in a short period of time,” said lawyers for FedEx, which is owed more than $1 million since the bankruptcy filing and more than $2.3 million in pre-bankruptcy claims. The delivery giant will likely take a complete loss on the pre-filing debt, according to court documents and bankruptcy experts.
“The vendors won’t get anything back on the merchandise that was in the stores on the day they filed,” explained Adam Stein-Sapir, an expert on distressed debt.
“People who are shopping at Barneys now are helping the liquidators and not the vendors who supplied Barneys, many of whom will suffer a meaningful haircut as the company winds down,” added Bradford Sandler of Pachulski Stang Ziehl & Jones LLP, who is representing the creditor’s committee.
Many vendors only continued to do business with Barneys in bankruptcy because it received $244 million in financing to continue to operate the business. Prada was among the few vendors who refused to sell to Barneys in bankruptcy, according to sources.
But after selling itself to ABG for $271 million, there is simply not enough cash to go around. There will be just under $30 million left after paying off the $244 million to pay vendors and other expenses like the pricey professional advisers Barneys hired — including law firm Kirkland & Ellis, which charges upward of $1,000 an hour for its legal services, according to David Tawil, president of Maglan Capital, a distressed debt firm.
“The financing wasn’t enough,” Tawil told The Post.
Kirkland & Ellis, which is representing Barneys, did not respond to a query from The Post.
“It’s unfortunate that a marquee brand worth almost $1 billion in sales wasn’t able to pay anything to the vendors who made Barneys the brand that it was,” Stein-Sapir said.
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