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Gucci, Prada Take Up Plight of Workers in Barneys Bankruptcy

Lauren Coleman-Lochner and Eliza Ronalds-Hannon

(Bloomberg) -- Even some of the world’s toniest luxury makers are speaking up on behalf of workers threatened by store closures.

Their concern is highlighted in a court statement from a group of Barneys New York Inc. creditors, which include high-end brands like Gucci and Prada, in support of a bid that would keep more of the bankrupt retailer’s existing stores open.

Preserving those outlets “would inure to the benefit of the thousands of employees -- many who live paycheck to paycheck,” not to mention vendors, landlords and customers, according to the document filed Wednesday by the official committee of unsecured creditors.

Concerns about workers displaced by retail bankruptcies and liquidations have gained prominence since former employees at Toys “R” Us Inc. organized to demand promised severance pay after that retailer collapsed. The group caught the attention and support of prominent lawmakers including presidential candidates and senators Elizabeth Warren and Cory Booker.

A promise to save jobs at Sears Holdings Corp. helped Edward Lampert secure ownership of the bankrupt retailer after Sears initially rejected his going-concern bid in favor of buyers who would have shuttered the chain.

Societal Needs

While bankruptcy auctions typically are won by the highest bidder, the Barneys creditors argued that “societal needs -- such as preservation of employee jobs -- are an appropriate consideration in weighing competing offers.”

In the 2009 bankruptcy case of Dial-A-Mattress, the fate of workers was identified among key issues to consider in evaluating the highest and best offer, the creditors committee said.

The Toys “R” Us case last year was a watershed, after more than 30,000 workers didn’t receive expected severance pay. Working with the advocacy group United for Respect, former employees rallied for not only the creation of a severance fund but also higher priority for workers’ claims in bankruptcy.

Some of those demands found their way into proposed legislation, and the toy seller’s former private-equity owners created a $20 million severance fund.

“Our financial and bankruptcy rules are broken and must be changed so that working people’s livelihoods are protected,” said Sarah Woodhams, a former Toys worker who now works with United for Respect.

Authentic Brands Group LLC has been designated the so-called stalking-horse, or lead, bidder to buy the assets of Barneys.

The terms of its about $271 million offer include plans to open Barneys shops in 41 Saks Fifth Avenue stores, while closing most of the existing locations. A going-concern bid from a consortium led by entrepreneur Sam Ben-Avraham failed to qualify, leading to the cancellation of a scheduled auction.

Ben-Avraham is planning to make another bid to buy Barneys, WWD reports, citing unidentified people familiar with the matter.

Representatives for Barneys and Ben-Avraham didn’t immediately respond to requests for comment. Authentic declined to comment.

Barneys last week said it would continue to evaluate offers up until its sale hearing on Oct. 31.

The case is Barneys New York Inc., 19-36300-cgm, U.S. Bankruptcy Court for the Southern District of New York (Poughkeepsie).

(Updates with worker comment in the 10thparagraph)

To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net;Eliza Ronalds-Hannon in New York at eronaldshann@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Nicole Bullock

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