Richard Perry and Ron Burkle Preparing For Barney's Post-Christmas Bankruptcy

The Dubai collapse is about to claim its first domestic icon in the face of Barney's luxury store. The New York retail icon is set to file for bankruptcy after the Christmas season, or such at least are expectation of the company's key bondholders - Perry Capital and Ron Burkle's Yucaipa according to the NY Post. What the union-leveraged Burkle sees in the retailer is a big unknown (absent some firm principals' fascination with the firm's metrosexual merchandise), however, the firm, together with Richard Perry, is said to have accumulated virtually all the bonds in the name, at about 60 cents on the dollar, likely in advance expectations of a debt-to-equity conversion.

From the Post:

Hedge-fund tycoon Richard Perry and billionaire Ron Burkle -- who together own nearly all the $500 million in debt that Dubai-based Istithmar sold when it acquired Barneys for $942 million in 2007 -- are said to be bracing for a possible post-Christmas bankruptcy filing at Barneys, sources said.

Istithmar recently has begun to accept huge losses in order to exit failed investments, including the W Hotel at Union Square this week.

If the economy takes another turn for the worse, Istithmar may be forced to either take a loss on Barneys or inject more cash to keep pricey shoes, handbags and designer clothes flowing to stores.

Meanwhile, however, sources said Perry and Burkle aren't interested in running Barneys, either. That's despite the fact that Perry's wife, Lisa, is a fashion designer and Burkle has previously taken an active role in other trendy fashion ventures like the boutique Scoop and designer Zac Posen.

Sources said Perry and Burkle aren't working together on Barneys -- indeed, the pair are wary of each other, partly because of bad blood over Burkle's sparring with Perry's close friend Eddie Lampert during the restructuring of the latter's Sears and Kmart chains.

Nevertheless, sources said Burkle's investment firm Yucaipa has contacted potential investors including NRDC and TPG -- the private-equity firm that partnered to take Neiman Marcus private in 2005 for $5 billion.

"They're asking, 'What are we going to do with [Barneys] if we end up owning it?' " according to one source close to the talks.

NRDC's CEO, the Big Apple real estate tycoon Richard Baker, has long eyed Barneys as a potential crown jewel for his young but fast-growing retail empire, sources said. Baker acquired Lord & Taylor in 2006 and scooped up Canada-based Hudson's Bay last year.

But despite his appetite, the shrewd dealmaker "doesn't pay retail" when it comes to buying retail chains, one industry insider noted.

Meanwhile, Burkle -- who reportedly paid 60 cents on the dollar for his half of Barneys' debt -- would be "pushing the envelope" if he were looking to turn his investment around for a quick profit, according to one source.

With Istithmar taking a wash in its W Union Square holdings and soon to be foreclosed upon the Mandarin Oriental Columbus Circle, not to mention a complete collapse in Dubai imaginary economy, relinquishing control of Barney's may be a done deal. Furthermore, with the upper class clamping down on spending as we reported yesterday, one really wonders just how long before the most recent round of Burkle-Perry funded equitization ends up going straight to 1 Bowling Green yet again. The good news: Jefferies will be there to issue 20% yielding Sr. Secured bonds for the retailer come rain or shine, allowing a dividend recap to the hedge fund sponsors the second the high yield window open up sufficiently. And if Clear Channel's $750 million note offering (managed by GS, Citi, Credit Suisse, DB and MS) announced today is any indication, Jefferies may be already soliciting interest in a dividend recap deal as this is being typed.