Barneys New York Inc. filed for bankruptcy protection with plans to close most of its stores and a $75 million financing package that would give the luxury retailer time to find a buyer.
The restructuring plan, filed early Tuesday morning, has Barneys, which operates 13 department stores and 9 warehouse stores, shutting down stores in Chicago, Las Vegas and Seattle. The retailer will continue to run seven stores, including its flagship Manhattan store, the company said.
The chapter 11 filing in the Southern District of New York indicates the company has more than $100 million in assets and more than $100 million in debts. The creditors include fashion houses such as Yves Saint Laurent, Balenciaga and Gucci.
The retailer, controlled by the New York hedge fund Perry Capital, struggled to navigate the rise of e-commerce and increase in rent which nearly doubled this year to $27.9 million from $16.2 million for their store in Manhattan. Barneys fought the rent increase but lost during an arbitration proceeding earlier this year, prompting the retailer to hire restructuring advisers.
The Wall Street Journal went on to say:
“Barneys Chief Executive Daniella Vitale said Barneys had been hurt by a broader downturn in retail as well as “excessively high” rent. Bankruptcy protection “will provide the company the necessary tools to conduct a sale process, review our current leases and optimize our operations,” she said.
The Wall Street Journal reported Monday the company was close to filing for bankruptcy and near a financing deal with Gordon Brothers and Hilco Global, firms specialized in selling assets for distressed companies. The loan was expected to fund the company’s stay in bankruptcy for 60 days while it attempted to clinch a deal with a buyer, according to people familiar with the matter. If Barneys cannot reach a deal, it would liquidate, they said.
Barneys is much smaller than rivals Saks Fifth Avenue and Neiman Marcus, which each operate about 40 department stores. Barneys was carrying approximately $200 million in debt, the people said.
Barneys’ existing lenders Wells Fargo & Co. and TPG Sixth Street Partners, a credit investor partly owned by private-equity firm TPG, allowed the company to take the junior loan from Gordon and Hilco.
A number of potential buyers have expressed interest in the iconic chain but need time to complete their due diligence, some of the people said.
In recent months the company hired restructuring advisers and lawyers M-III Partners LP, Houlihan Lokey Inc. and Kirkland & Ellis to negotiate a restructuring and prepare a bankruptcy filing.
The filing marks the second trip through bankruptcy court for the retailer, which filed for protection from creditors in 1996. It avoided another bankruptcy in 2012 when Perry Capital, one of its lenders at the time, took majority ownership of the company in an out-of-court deal.
Barneys’ travails come as traditional retailers are struggling with the shift to online shopping and facing off against a host of technology-driven startups like Net-a-Porter, an online fashion seller, and The RealReal Inc., which lets consumers buy or sell secondhand luxury goods.
Department stores, in particular, have struggled to bring shoppers into their cavernous locations. Chains from Macy’s Inc. to J.C. PenneyCo. have closed hundreds of stores, and others, including Sears and Bon-Ton Stores, have resorted to bankruptcy filings.”
—Andrew Scurria contributed to this article.
Write to Soma Biswas at soma.biswas@wsj.com and Juliet Chung at juliet.chung@wsj.com