Dubai World has ceded control of its investment in Barneys, a luxury New York retailer, after the company underwent a major restructuring of its debts.
Istithmar World, an investment arm of Dubai World, bought Barneys for US$942.3 million (Dh3.46 billion) in 2007, but lost control of the company this week in a deal with creditors.
Barneys announced that Perry Capital, the company's largest lender, and Yucaipa Companies, an investment firm, are set to exchange their debt for equity, reducing the long-term debt burden for Barneys from $590m to $50m.
Istithmar will become a minority shareholder, alongside Yucaipa, with Perry owning the majority of the luxury retailer.
Barneys was just one of a number of investments made by Istithmar in Dubai's boom years running up until 2007.
The investment company also bought into Loehmann's, a US department store chain, which emerged from bankruptcy in March last year. It bought the luxury liner Queen Elizabeth 2 for $100m from Cunard in 2007 and took a 20 per cent stake in Cirque du Soleil, a circus and arts entertainment show.
In hospitality, Istithmar bought a 73 per cent stake in the Mandarin Oriental in New York for $340m in 2007 and the W Hotel Union Square for $285m in 2006, which was eventually sold in a foreclosure auction in December 2009 for just $2m.
Last week, Istithmar bought the 50 per cent it did not own in Atlantis The Palm hotel in Dubai for $250m from the previous co-owner, Kerzner International Holdings.
It first emerged in February that Barneys was restructuring its debts after amassing loans with unsustainable repayments. Istithmar declined to comment on the latest developments. Barneys said it had achieved double-digit same store sales growth last year and that the restructuring would benefit the brand.
"This agreement provides us with increased free cash flow that will be used to revitalise our stores, invest in Barneys.com and further enhance our customer experience at a time when our operational financial performance is very strong," said Mark Lee, the Barneys chief executive. "Our customers, vendors and employees will benefit from this significant deleveraging which will reinforce Barneys' unique position as the preeminent luxury specialty retailer."
Richard Perry, the chief executive of Perry Capital added: "Barneys New York is an extraordinary brand that will become even stronger through this transaction. We are confident that the new capital structure will provide the Barneys management team with the financial flexibility it needs to continue its already impressive performance.
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