Dubai’s debt crisis could help push Barneys New York back into American hands by early next year — specifically, the clutches of New York hedge-fund tycoon Richard Perry and Los Angeles billionaire Ronald Burkle.
Istithmar, part of the Dubai government’s investment arm that is looking to delay payments on tens of billions of dollars in debt, shelled out $942 million to buy the luxury retailer in 2007 from Jones Apparel, the New York-based owner of brands like Nine West.
Now, as Dubai’s financial troubles worsen, Istithmar could be forced to give up control of Barneys to a pair of powerful US creditors. Perry quietly became Barneys’ largest bondholder earlier this year, and Burkle has recently amassed a big chunk of the luxury chain’s $500 million debt load.
Sources note that Burkle, who has taken big stakes in retailers and fashion houses ranging from Whole Foods to Sean John, has a taste for exerting operational control over his investments.
“Either way, it is all going to happen earliest in December, latest in February,” said one source close to the situation.
Istithmar’s prospects for keeping Barneys depend not only on Dubai’s ability to restructure its own finances, but on how the crucial holiday shopping season plays out. Last spring, the embattled fund pumped more than $20 million into Barneys to keep fashions flowing to stores after last year’s disastrous holiday season.
If slack demand for Armani suits and Gucci bags makes a fresh cash infusion necessary, Istithmar might be forced to exit.
“Alternatively, the economy suddenly changes and Barneys starts making enough cash to pay its debts,” a source told The Post.
In August, Istithmar hired Perella Weinberg Partners to assist in a possible Barneys restructuring. But in an interview with CNBC last month, Istithmar CEO David Jackson denied reports that his firm was considering a sale of the chain.
“We don’t think it makes sense,” Jackson said, citing the retailer’s beaten-down valuation. “We think it’s probably going to take a year before people start to see value in a luxury retailer again.”
Still, skeptics note that Jackson’s powers of prediction have been spotty of late. In the same interview last month, for example, he insisted that “Dubai has and will continue to honor its financial obligations,” adding, “The rumors of our death are greatly exaggerated.”
Last week, Dubai rattled world markets as it asked creditors for a six-month standstill on interest payments for about $60 billion in debt. Istithmar contributed to the mess by acquiring New York properties like the W Hotel in Union Square and the Loehmann’s off-price clothing chain, in addition to Barneys.
Meanwhile, Barneys disclosed this month that its October same-store sales rose 7 percent. While that failed to offset a much steeper decline a year ago, industry experts said it could help the chain avoid a year-end cash crunch.
A sale of Barneys would “require Dubai to recognize a huge (close to total) loss on its investment,” according to one source close to the situation. That’s “something that Dubai isn’t going to let happen” unless either Barneys ends up in a cash crunch, or Dubai does a “complete restructuring” that would recognize “all of its losses on its investment portfolio, of which Barneys is only one.”