"This agreement provides us with increased free cash flow that will be used to revitalize our stores, invest in Barneys.com and further enhance our customer experience at a time when our operational financial performance is very strong, " Barneys Chief Executive Mark Lee said in a statement.
The LA magnate Ron Burkle's Yucaipa Cos. and Perry Capital took ownership of Barneys in a debt-restructuring deal, Barneys announced Monday. Perry Capital is the majority owner thanks to a deal that slashes Barneys' debt to $50 million from $590 million, reported the ‘LA Times’.
Specifically, the agreement calls for the hedge fund and The Yucaipa Companies to become partners to convert their respective holdings of Barneys’ debt for equity stakes. Yucaipa will have also have ownership stake of the firm while current owner Istithmar World will have a minority stake. Also in the announcement, Barneys reported double-digit comparable sales growth and a 40 percent increase in annual EBITDA for the full year 2011 compared to 2010. Barneys was acquired in 2007 for nearly $1 billion by Istithmar World, the investment arm of the Dubai government. The deal involved a high deal of debt, which has caused problems for the company.
Burkle originally made an offer to take a controlling stake in Barneys in 2010. At the time, he offered to inject $50 million into the chain in a deal that would have given him 80% of the company's common stock. The deal did not go through but now, in virtue of the new operation, Burkle will get an equity stake in the company with the current deal, which will enable Barneys to avoid bankruptcy.