Windswept Palaces of Dubai Falling Like Quicksand
Barneys New York May File for Bankruptcy to Wrest Free from Dubai Ownership
World renowned fashion trendsetters Barneys New York is looking into different debt restructuring and bankruptcy tactics that can possibly wrestle the company reins from their current owners, Istithmar Capital of Dubai When they purchased Barney’s in 2007 for $942.3 million, they saddled the company with leveraged debt.
Dubai World’s grandiose Barney’s buy-out with wrinkled budget in tow is consistent with Dubai’s attitude that money is an endless resource. Dubai, not immune to the recession, recently tagged their debt at 80 billion. Many speculated the debt was due to the hapless financiers, and they aren’t far off: their financing parent company Dubai World was liable for $59 billion at the tail end of 2008. What recourse does Dubai have: they certainly can’t file a municipal bankruptcy as an entire country; in fact they can’t file bankruptcy at all as Dubai has no form of Chapter 11 bankruptcy.
For now, Dubai is remaining hopeful about its own ventures by putting their champagne dreams on hold before they fizzle out. For instance, their wide-scale theme park plans have been put on hiatus. Dubai Land was to be 100 square miles and include a Tiger Woods designed golf course. At this rate of off-track investment projects, who knows if Dubai Land will even happen, ensuring Dubai will fulfill its destiny of an artificial snow park under a glass dome?
One thing Dubai hasn’t put on hold is their ownership of the continuously profitable Barney’s, which is clearly tired of being saddled with Istithmar’s debt. For Barney’s New York to even consider bankruptcy in order to wrest control makes Istithmar Capital appear to be uncooperative business partners. As previously mentioned, Dubai and United Arab Emirates have no equivalent to Chapter 11 or personal bankruptcy, and partners in dire financial straits thus face unpleasant criminal accountability: one standout report has a German businessman named Martin Bender held in Dubai prison for two years due to a 16 million dollar bounced check. Who knows how they react with a partner like Barney’s in a more serious bankruptcy case?
As they say, people who live in defunct artificial snow parks under glass domes shouldn’t throw stones. Dubai’s 80 billion dollar debt and lack of bankruptcy solution puts them in hypocritical financial spot where they act as indignant investors (such as Dubai World’s stake in MGM Mirage) despite being at the end of their financial tether. Luckily, our U.S. personal bankruptcy and corporate bankruptcy don’t imitate Dubai’s enforced prison terms. Find out how a bankruptcy can help save your finances by calling our bankruptcy attorneys toll free at 1.800.260.1402 today!
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