Hedge fund behind Barneys to liquidate assets and shut down

Richard Perry, the brain behind Perry Partners LP, a 28-year old fund that has returned an average of 15 percent a year for decades, has set Barneys New York management to an estate of uncertainty after announcing it will be shutting down its business.

“I had to be realistic, and it hadn’t been working for the last couple of years,” Perry said. “I decided that it would be better not to be in this mark-to-market world, and focus on longer-term investments,” said Perry to the ‘New York Post’.

Commenting on the potential implications for the upscale New York department store chain, Perry Capital, in a statement, said, “Barneys is well-positioned, both financially and strategically. Perry Capital has the capital and the team in place to evaluate strategic decisions that will deliver appropriate value to investors.”

“We are profitable. We are not in distress. We don’t depend on Perry Capital to pay our bills,” Mark Lee, Barneys’ chief executive officer, told 'WWD' from Paris Fashion Week, stressing their resilience.

Trying to reassure investors, sources with knowledge of the matter said to the ‘company say it is “financially sound and profitable” and that despite its uncertain ownership situation, “it’s business as usual.”

Despite the company´s confidence, some of its main providers are not that convinced that Perry´s departure is not going to affect their business.

“We have many millions of dollars of orders right now for Barneys, and they are actually buying amounts larger than [2015] and from more vendors,” said Gary Wassner, chief executive of Hilldun Corporation, a lender to the fashion industry, commenting the news for the ‘New York Post’.

After hiring Goldman Sachs to find a buyer for his stake, Perry starts liquidating his fund

Red flags first appeared in late September when, in a letter to investors, the billionaire hedge fund mogul said he was in the process of liquidating the assets of the 4.1 billion dollars fund.

In June, he hired Goldman Sachs to shop for investors interested in a minority stake in Barneys. Questioned about any potential developments on this front, Goldman Sachs declined to comment on whether its mandate has changed since then and if it’s looking for a buyer for the entire company.

Ron Burkle’s Yucaipa Cos. and Barneys’ former owner, Istithmar World, are minority owners. Perry serves as Barneys’ chairman. He is credited with shoring up its finances, sparing it from a second trip to the bankruptcy court and reducing its debt to 50 million dollars from 590 million dollars.

It´s worth recalling that, around the time that Perry hired Goldman Sachs, Barneys posted same-store sales declines of 10 percent in the first quarter, according to people close to the company quoted by the New York journal.

In related news, the leases of the company´s flagship stores on Madison Avenue in New York and in Beverly Hills come due in 2019, adding to the pressure on current management to find a financially viable alternative for the business. The rents for those sites are expected to increase significantly, according to real estate experts.

Photo Credits: Barneys New York