Barneys Said to Weigh Debt Swap as Holt Renfrew Shows Interest

Barneys New York is weighing a debt restructuring or bankruptcy filing that may wrest control from the Dubai government-owned firm that loaded it with debt in a 2007 leveraged buyout, three people briefed on the matter said.

Hedge fund Perry Capital LLC, which helped finance the $942.3 million takeover, has been approached by Holt Renfrew, the Toronto-based department-store chain, about a joint offer for control of the 86-year-old luxury retailer, one of the people said. Holt Renfrew, owned by Canadian billionaire Galen Weston, has stores in cities including Montreal and Vancouver.

Barneys’ debt was cut two grades to three levels above default in July by Moody’s, which cited its “strained financial condition” amid declining sales and “sizeable” debt from the takeover by Istithmar PJSC, a unit of Dubai World. Sales at luxury retailers Barneys, Saks Inc. and Neiman Marcus Group Inc. have tumbled as customers cut spending during the recession.