x Abu Dhabi, UAEThursday 27 July 2017

Istithmar's rescue mission

Istithmar World has sent a team of advisers to New York to rescue the discount retailer Loehmann's from the clutches of hungry creditors.

Istithmar World has sent a team of advisers to New York to rescue Loehmann's, a discount retailer it owns, from the clutches of hungry creditors.

Led by Dr Shuja Ali, Istithmar's head of portfolio management, the team will try to sign a deal with Loehmann's bondholders to delay repayment of debts that become due next year, according to a source at the Dubai World investment arm.

They will join a group of outside advisers to patch together the ailing department store chain and prevent it from slipping into its second bankruptcy since 1999.

Dr Ali, a former physician who worked as a consultant before coming to Istithmar, will also review other investments in New York that could need mending in the near future.

While it has sold many of its New York assets, Istithmar still owns a building located at 450 Lexington Avenue, the Mandarin Oriental hotel at Columbus Circle and the luxury retailer Barneys New York, among other investments. Istithmar declined to comment.

"We continue to be supportive of Loehmann's and are actively working with management, bondholders and other stakeholders to find a mutually agreeable position to save the company," Andy Watson, Istithmar's acting chief executive, said last week.

Founded as a one-store operation in 1921 by Frieda Loehmann, the retailer passed through numerous hands in the 1980s and 1990s before going bankrupt as the decade ended.

In 2006 Istithmar snapped up an 88 per cent stake from Arcapita, a Bahraini investment company, for about US$264 million (Dh969.6m).

Loehmann's, perhaps best known for its "Back Room" - a section of the store where frenzied shoppers look for bargain-basement prices on fashionable brands - ran into trouble as consumer demand for designer goods flagged after the financial crisis. Last month it said that it would close up to 15 stores that were performing poorly.

Loehmann's said last week holders of only 92.4 per cent of the value of a bond due next year agreed to extend repayment for three additional years. That was short of the 97 per cent target.

Istithmar's struggle to keep Loehmann's afloat is only the latest of its battles, with creditors eager to squeeze as much cash as they can out of troubled businesses.

Istithmar lost the W Hotel Union Square, a 270-room hotel in New York City for which it paid $285m in 2006, in a foreclosure auction this year.

It handed over the Knickerbocker Hotel in New York's Times Square to Danske Bank in March after failing to meet mortgage payments. Istithmar acquired that property in 2006 for $300m.

It has also had trouble with Barneys, which sources close to Dubai World say is likely to be one of the first assets to be sold as the conglomerate raises money to repay creditors as part of a $24.9 billion debt restructuring agreed to last month. Istithmar bought 90 per cent of Barneys in 2007, valuing the business at $942m.

"Everybody has looked at Dubai's assets," David Rubenstein, the chief executive and co-founder of the Carlyle Group, one of the world's biggest private equity firms, said on the sidelines of a conference in Morocco last week.

"I suspect there will be sales at some point but not at overly distressed prices would be my guess."

Istithmar has already rebuffed a $3.4bn offer for the Atlantis, The Palm on the Palm Jumeirah last month. There are also no plans to sell a 20 per cent stake in Canada's Cirque du Soleil, acquired in 2008 for an undisclosed sum.

"They are still a good partner of us," said Daniel Lamarre, the Cirque du Soleil president and chief executive. "We have not been aware of any intention from them to sell their participation in Cirque du Soleil. For us, it's business as usual."

 

bhope@thenational.ae