Barneys gets new owner in debt-for-equity deal

NEW YORK (Reuters) - Barneys New York Inc DBWLDB.UL has struck a deal with Perry Capital, its largest lender, that will erase most of the luxury chain's debt and turn the hedge fund into its majority owner.

Under a debt-for-equity swap with Perry Capital, as well as other lenders, Ron Burkle’s Yucaipa Cos and current owner Istithmar World, the chain’s long-term debt will fall to $50 million from $590 million, Barneys said on Monday.

Barney Chief Executive Mark Lee said in a statement that the deal frees up cash for revitalizing its stores and improving its e-commerce site.

Jones Group Inc JNY.N sold Barneys for $942 million in 2007 to Istithmar World, the investment arm of state-owned Dubai World DBWLD.UL. That acquisition left Barneys with a $660 million debt load.

The upscale chain's sales swooned during the financial crisis of 2008-09, when well-heeled shoppers pulled back on luxury spending. But like Saks Inc SKS.N, Nordstrom Inc JWN.N and Neiman Marcus Group NMRCUS.UL, Barneys' sales have rebounded in the last two years.

In 2011, comparable sales rose by a double-digit percentage, Barneys said.

Barneys, which operates nine department stores, including a flagship on Manhattan’s Madison Avenue and a chain of less expensive co-op stores, said in February it had hired a restructuring firm to help it with debts coming due this year.

The following day, on February 9, Standard & Poor’s lowered Barneys’ credit rating to ‘CC’ from ‘CCC,’ saying its debt level was “unsustainable.”

Reporting by Phil Wahba in New York