The New York Times - 06.08.2019

THE NEW YORK TIMES BUSINESSTUESDAY, AUGUST 6, 2019 0 N + B3

RETAIL | WORKPLACE | FINANCE

LONDON — HSBC’s chief execu-

tive, John Flint, is stepping down

after 18 months in the role, a sur-

prise announcement that the bank

said Monday was “by mutual

agreement with the board.” Noel

Quinn, the bank’s chief executive

for commercial banking, will fill

the top job on an interim basis

while the bank begins a global job

search.

Mr. Flint resigned on the same

day that HSBC, Europe’s largest

bank by assets, reported what

several analysts described as

solid results. Profit after tax for

the first half of 2019 rose 18.1 per-

cent to $9.9 billion, while revenue

was up 7.6 percent to $29.4 billion.

But the bank also announced

job cuts amounting to nearly 2

percent of its global work force of

close to 238,000. One analyst, Ben-

jamin Toms at RBC Capital Mar-

kets, an investment bank, cited

“geopolitical uncertainty” as af-

fecting the bank’s global business.

HSBC, based in London, ap-

pears to be preparing for a more

challenging environment as the

trade wars between the United

States and China cast shadows

over its critical Asia businesses,

and Brexit remains unresolved.

HSBC, which was founded in

Hong Kong, generates about 80

percent of its profit in Asia.

“In the increasingly complex

and challenging global envi-

ronment in which the bank oper-

ates, the board believes a change

is needed to meet the challenges

that we face,” Mark Tucker, the

bank’s chairman, said in a state-

ment on Monday. He said internal

and external candidates would be

considered for the top job.

The bank said its “outlook has

changed” and listed a number of

reasons, including “geopolitical is-

sues” that could affect some of its

major markets and uncertainty

over “the nature and impact” of

Britain’s departure from the Euro-

pean Union. The bank also said in-

terest rates on the dollar appeared

headed down rather than up, a po-

tential headwind. Last week, the

Federal Reserve lowered its

benchmark rate for the first time

since the 2008 financial crisis.

Mr. Flint, 51, who spent his en-

tire career at HSBC, said in a

statement: “I have agreed with

the board that today’s good inter-

im results indicate that this is the

right time for change, both for me

and the bank. After almost 30

years with HSBC, I will be sad to

leave, but I do so looking forward

to a new personal challenge, and

confident that our people will con-

tinue to serve the bank’s stake-

holders in the best possible way.”

Mr. Toms, the RBC analyst, said

a steep fall in profit in the bank’s

important global banking and

markets business reflected

changing conditions facing the

company. He said geopolitical un-

certainty and the changing inter-

est rate environment were weigh-

ing on “trade flows, growth and in-

vestor sentiment.”

HSBC Chief

Steps Down

Unexpectedly

By STANLEY REED

John Flint, who

was C.E.O. of

HSBC for only 18

months, resigned

“by mutual

agreement” with

the bank’s board

of directors.

Barneys NY, the department store
chain that once defined a certain
Manhattan creative cool, con-
firmed weeks of speculation by
announcing at midnight on Mon-
day that it was seeking bank-
ruptcy protection in order to re-
structure its business and pursue
a sale.
To stay afloat during its Chapter
11 proceedings, the retailer, which
is controlled by the hedge fund
Perry Capital, has struck a deal
for $75 million in additional fi-
nancing with two firms, Gordon
Brothers and Hilco Global. It
plans to close 15 of its 22 locations,
including stores in Chicago, Se-
attle and Las Vegas, as well as
most of its outlets.
However, its Madison Avenue
store in Manhattan, the building
that has become synonymous
with the brand name, will stay
open, and its nine-floor footprint
will also remain the same. The
company plans to move inventory
and some employees from its
shuttered locations into the seven
remaining stores. It denied that
this was in preparation for a liqui-
dation of stock.
“Our goal is to continue serving
our customers in key flagship
markets and globally through
Barneys.com for the long term,”
Daniella Vitale, the store’s chief
executive, said in a statement.
“While difficult decisions had to
be made, this process will allow us
to reset our financial position and
maintain our longstanding vendor
relationships.”
Known originally for its racks of
conceptual black, eclectic home
wares, and willingness to follow
its own aesthetic compass rather
than trends, Barneys was a mag-
net for new designers. It was a
place for consumers to discover
talent, and a harbinger of the cut-
ting edge. Its singularity and will-
ingness to take chances on new
names gave it power to demand
exclusives and a certain — per-
haps inflated — sense of its own
importance.
The Madison Avenue location,
though, is now the immediate
cause of retailer’s troubles. Bar-
neys does not own its real estate,
unlike some retailers. (Saks, for
example, owns many of its stores,
including its famous Fifth Avenue
location.) Last August, an arbiter
ruled that the annual rent at the
Madison Avenue store could be
raised to $30 million from $16 mil-
lion.
That ruling, combined with a
slowdown in foot traffic and rent
increases at other stores, put
enormous pressure on the com-
pany. Madison Avenue accounted
for a third of the company’s reve-
nue, and at its height brought in
$300 million a year in sales. For
the last year and a half, however,
sales have been falling.
For months, Barneys has been

in talks with potential partners

who could inject fresh capital into

its coffers. But many of them

wanted to be protected in case

Barneys failed, making it difficult

for the retailer to secure the capi-

tal before filing for Chapter 11, ac-

cording to a person with knowl-

edge of the discussions who spoke

on the condition of anonymity be-

cause the talks were private.

Barneys plans to use the financ-

ing to pay its financial commit-

ments, and acknowledged that it

might have to go to a “cash on de-

livery” relationship with brands.

Vendors and designers had be-

come increasingly anxious as

Barneys’ troubles began to be re-

ported, and some started with-

holding orders from the stores be-

cause they feared not being paid.

They said a lack of communica-

tion from store management

about what Barneys was planning

to do contributed to the situation.

The company now plans to en-

gage in a formal sales process. It

said that multiple parties (though

no other department store

groups) had expressed interest,

and that one offer had fallen

through due to lack of time.

“We look forward to executing a

sale that carries Barneys into its

next chapter,” Ms. Vitale said.

That may include using the

Madison Avenue store to offer

more “experiences” to shoppers

— including more restaurants,

beauty services and entertain-

ment — in hopes of getting more

people to walk through its doors.

Barneys is also moving ahead

with announced openings in the

Bal Harbour shops in Miami

Beach, the American Dream Mall

in New Jersey and a smaller Las

Vegas location.

Whether the Madison Avenue

store — once a jewel in New York’s

shopping crown — becomes a

turnaround fairy tale or the poster

child for the current woes of the

retail world is now the question.

Once-feted stores like Henri Ben-

del and the Lord & Taylor flagship

on Fifth Avenue closed just this

year, and there are a raft of empty

storefronts in previously desir-

able locations.

“The real issue is whether, after

the dust has cleared, there will be

a buyer interested in purchasing

the name and remaining good

will, which would allow Barneys

to continue operations either at

the seven remaining locations or

elsewhere,” said Eric Snyder,

chairman of the bankruptcy de-

partment at Wilk Auslander, a

New York law firm.

Barneys had been through

Chapter 11 before. In 1996, the

store’s original owners, the Press-

man family, filed for protection af-

ter they fell out with their invest-

ors, the Japanese department

store group Isetan. However, the

retail landscape was much differ-

ent then.

“It was hard on everyone in the

store, the vendors and the

customers,” said Julie Gilhart,

who was the fashion director and

senior vice president of Barneys

at the time. “But post-bankruptcy

I think we did some of our best cre-

ative work because we had no

budgets and had to think out of the

box.

“I believe the same could apply

now,” she continued, “but it’s more

challenging with online shopping

powered through social media

and alternative shopping plat-

forms which didn’t exist in 1996.”

Since a makeover begun in

2010, the Madison Avenue store

has felt both more accessible and

less unique. That, combined with

the rise of online retail and the

ability of smaller designers to take

their wares directly to consumers,

has slowly eroded some of Bar-

neys’ cultural power.

“When I was at Bergdorf’s, the

team at Barneys always kept us

on our toes,” said Robert Burke,

founder of a namesake luxury

consultancy and a former fashion

director of Bergdorf Goodman.

“You knew you would walk in

there and find something inspir-

ing and undiscovered.

“Today the online players cou-

pled with brands opening their

own stores and going direct to

consumer have taken a big share

of that market — the market that

Barney’s once had exclusively,” he

added.

Recent efforts to stay relevant,

such as a fancy cannabis shop that

opened this year in its Beverly

Hills store, have not restored Bar-

neys’ image to its former hip glow.

And designers no longer really

need department stores to reach

customers across the country.

The company has been advised

by financial restructuring special-

ists in recent weeks, including the

investment bank Houlihan Lokey,

the consulting firm M-III Part-

ners and the law firm Kirkland &

Ellis.

Barneys rejected the idea that a

migration to online shopping by

consumers was a death knell. Ac-

cording to company data, 60 per-

cent of its customers ages 34 and

under — the much-coveted mil-

lennial demographic — still shop

in its bricks-and-mortar locations.

“Physical stores are really im-

portant,” Ms. Vitale said. “Our

store customer tends to be the

most loyal, most engaged and has

the highest spend.” Though per-

haps not at quite so many stores.

Barneys to Close Most Outlets in Bankruptcy

“Our goal is to continue serving our customers in key flagship markets and globally through Barneys.com,” said Daniella Vitale, chief executive of Barneys.

HIROKO MASUIKE/THE NEW YORK TIMES

By VANESSA FRIEDMAN

and MICHAEL J. de la MERCED

A turnaround fairy

tale, or just another

victim of a retail

revolution?

A group of Democratic senators
has demanded in a letter sent to
Google’s chief executive, Sundar
Pichai, that the internet giant con-
vert its more than 120,000 tempo-
rary and contract workers to full-
time employees.
The letter, written by Senator
Sherrod Brown of Ohio, also urged
Google to stop its “antiworker
practices” and treat everyone at
the company equally.
“Making these changes to your
company’s employment practices
will ensure equal treatment of all
Google workers and put an end to
the two-tier employment struc-
ture you have perpetuated,” Mr.
Brown wrote. Among the 10 sena-
tors who signed were three run-
ning for president: Kamala Har-
ris, Bernie Sanders and Elizabeth
Warren.
As of March, Google had more
temporary workers than full-time
employees — 121,000 temps and
contractors and 102,000 full-
timers, according to company
data viewed by The New York
Times.
The senators’ letter, which was
sent last month, cites a May arti-
cle by The Times that explained
how Google had created a shadow
work force of temps, contractors
and other contingent workers
brought in through staffing com-
panies.
The senators pushed for a num-
ber of changes to how the com-
pany treats temps and contrac-
tors, including moving them to
full-time status after six months
as well as equalizing their wages
and benefits with permanent staff.
While many of the temps and
contractors sit in the same offices
as Google employees and often do
similar work, they usually make
less money, have significantly
worse benefit plans and do not en-
joy the same rights.
Most of Google’s contingent
workers are technically employ-
ees of staffing agencies, although
the company acts like the employ-
er in most cases — deciding when

they work and what they do and

assessing the quality of their

work, according to current and

former temps and contractors.

They have said they joined

Google hoping to land a full-time

job. When they encountered sexu-

al harassment or pressure to per-

form unpaid overtime from

Google employees, they were re-

luctant to speak up for fear that

they would be labeled trouble-

makers and not receive full-time

jobs.

Eileen Naughton, Google’s vice

president of people operations,

said in a letter replying to the sen-

ators that the company strongly

disagreed “with any suggestion

that Google misuses independent

contractors or temporary work-

ers.” She said the company’s prac-

tices “accord with the highest in-

dustry standards.”

Ms. Naughton said Google

worked with staffing companies

that had a particular expertise

and could offer a “career path to

employees.” She added that using

contingent workers was a com-

mon practice in almost every in-

dustry in the United States and

the government.

She did not directly address any

of the senators’ demands. Mr.

Pichai did not respond to the let-

ter.

Though Silicon Valley compa-

nies are among the richest in the

world, they have embraced em-

ploying temps. And while the pay

for engineers and executives in

Silicon Valley continues to rise, a

growing faction of workers at

many of those companies are not

sharing in the success.

Temps and contractors account

for 40 percent to 50 percent of

workers at most technology firms,

according to estimates by OnCon-

tracting, a site that helps people

find tech contracting positions.

By keeping a large portion of

their work forces contingent, com-

panies like Google save money

and maintain flexibility to de-

crease their head counts should

business conditions change.

Younger tech companies like

Uber and Lyft have built giant

businesses that depend largely on

the work of independent contrac-

tors, not employees.

Some Democrats are seizing on

the issue as another sign of in-

equality in the country. That has

put Google in their cross hairs.

Pete Buttigieg, the Democratic

mayor of South Bend, Ind., who is

also running for president, high-

lighted the widespread use of con-

tingent labor at Google when lay-

ing out his economic plan to give

more power to workers.

Mr. Brown has also been a vocal

critic of the growing use of so-

called “alternative work arrange-

ments” by companies. In his letter

to Google’s chief executive, Mr.

Brown said the company was us-

ing temporary and contract work-

ers for more than short-term and

nonessential work.

“We urge Google to end any

abuses of these worker classifica-

tions and treat all Google workers

equally,” he wrote. He noted that

the more than $800 billion in mar-

ket value of Google’s parent com-

pany, Alphabet, and Mr. Pichai’s

hundreds of millions of dollars in

stock compensation made it “that

much more difficult to stomach

the mistreatment of these work-

ers.”

When Google’s parent company

reported quarterly earnings last

month, Ruth Porat, the company’s

chief financial officer, said “some”

customer support workers from

staffing companies were being

brought “in-house.” A Google

spokeswoman declined to clarify

what constituted “some.”

In addition to the other de-

mands, Mr. Brown encouraged

the company to eliminate non-

competition clauses and prohibit

mandatory nondisclosure agree-

ments about the terms and condi-

tions of employment, including in

contracts between temps and

their staffing agencies.

He also said Google should ac-

cept liability for workplace vio-

lations that occurred with temps

or contractors — instead of pass-

ing responsibility onto staffing

agencies.

“Adopting these policies will ex-

tend the economic security of

Google employment to all individ-

uals who contribute to the compa-

ny’s success,” Mr. Brown said.

The other senators who signed

the letter were Richard Blumen-

thal of Connecticut, Benjamin L.

Cardin of Maryland, Richard J.

Durbin of Illinois, Edward J.

Markey of Massachusetts, Patty

Murray of Washington and Brian

Schatz of Hawaii.

Senators Press Google to Give Contractors Full-Time Status

By DAISUKE WAKABAYASHI

Democrats urged Sundar Pichai of Google to end “antiworker practices.”

TING SHEN FOR THE NEW YORK TIMES

Lawmakers’ letter

seeks changes in

wages and benefits.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF DELAWARE

In Re:

ELK PETROLEUM, INC., et al.,^1

Debtors.

§

§

§

Chapter 11

Case No. 19-11157 (LSS)

Jointly Administered

NOTICE OF PROPOSED SALE, BIDDING

PROCEDURES, AUCTION, AND SALE HEARING

PLEASE TAKE NOTICE that, on May 22, 2019, the debtors and debtors

in possession in the above-captioned chapter 11 cases (collectively, the

“Debtors”) filed voluntary petitions for relief under chapter 11 of the

Bankruptcy Code.

PLEASE TAKE FURTHER NOTICE that, on July 25, 2019, the Debtors

filed a motion (the “Motion”)^2 with the United States Bankruptcy Court

for the District of Delaware (the “Bankruptcy Court”) seeking, among

other things, entry of an order (the “Bidding Procedures Order”): (i)

modifying confirmation deadlines; (ii) approving the proposed bidding

procedures (the “Bidding Procedures”) by which the Debtors will solicit

offers for the sale (a “Sale Transaction” or “Sale”) of certain of their

assets (the “Assets”); (iii) establishing procedures for the assumption

and assignment of executory contracts and unexpired leases, including

a notice of proposed cure amounts (the “Assumption and Assignment

Procedures”); (iv) approving the form and manner of notice with respect

to certain procedures, protections, schedules, and agreements described

herein and attached hereto; (v) scheduling (a) an auction (the “Auction”)

if the Debtors receive two or more timely and acceptable Qualified Bids (as

defined below) and (b) a final hearing (the “Sale Hearing”) to approve a

Sale of the Assets; and (vi) granting related relief.

PLEASE TAKE FURTHER NOTICE that, pursuant to the Bidding Procedures

Order, the confirmation hearing on the Joint Plan of Reorganization

[Docket No. 15] (the “Plan”) is continued to September 20, 2019. The

Plan Supplement (as defined in the Plan) shall be filed with this Court and

posted on the Case Website at https://case.stretto.com/elkpetroleum no

later than September 6, 2019. Any objections to the Plan and Disclosure

Statement (including any objections regarding executory contracts

and unexpired leases which will be assumed under the Plan) shall be

filed no later than September 13, 2019. Any reply with respect to such

objections shall be filed no later than September 17, 2019. The Debtors

shall subsequently file notices with the Bankruptcy Court (which will also

be posted on the Case Website at https://case.stretto.com/elkpetroleum)

to provide updates regarding the sales process and any rescheduled dates

with respect to confirmation of the Plan.

PLEASE TAKE FURTHER NOTICE that, pursuant to the Bidding Procedures

Order, if the Debtors receive two or more timely and acceptable Qualified

Bids for the same Assets, the Debtors will conduct the Auction on

September 16, 2019 at 10:00 a.m. (prevailing Eastern Time) at

the offices of counsel for the Debtors, Norton Rose Fulbright US LLP, 1301

Avenue of the Americas, New York, NY 10019, or such other place and time

as determined by the Debtors, after consulting all Qualified Bidders and

the Consultation Parties. Any party that wishes to take part in this process

and submit a bid for the Assets must submit its Bid in accordance with the

Bidding Procedures by September 13, 2019 at 5:00 p.m. (prevailing

Eastern Time) (the “Bid Deadline”). Only the Debtors, the Consultation

Parties, any other Qualified Bidder and/or other party as the Debtors may

determine to include in their discretion, in each case, along with their

representatives and advisors, shall be entitled to attend the Auction (such

attendance to be in person), and only Qualified Bidders will be entitled to

make Overbids at the Auction. All interested or potentially affected

parties should carefully read the Bidding Procedures and the

Bidding Procedures Order.

PLEASE TAKE FURTHER NOTICE that the Debtors have the right to

adjourn or cancel the Auction at or prior to the Auction.

PLEASE TAKE FURTHER NOTICE that the Sale Hearing to consider

approval of the sale of the Assets to the Successful Bidder at the

Auction, free and clear of all liens, claims, interests, and encum-

brances in accordance with Bankruptcy Code section 363(f ), will

be held before the Honorable Laurie Selber Silverstein, United

States Bankruptcy Judge for the District of Delaware, at the

Bankruptcy Court, 824 N. Market Street, Wilmington, Delaware

19081 on September 20, 2019 at 10:00 a.m. (prevailing Eastern

Time). The Sale Hearing may be adjourned from time to time

without further notice to creditors or other parties-in-interest

other than by announcement of the adjournment in open court or

by notice filed on the docket of these chapter 11 cases.

PLEASE TAKE FURTHER NOTICE that all objections, if any, to the Sale or

entry of the Sale Order (collectively, the “Sale Objections”), except as

to the proceedings of the Auction, the Successful Bidders’ revisions to

the Form Purchase Agreement and the Form Sale Order and the identity

of the Successful Bidder and its ability to provide adequate assurance

of future performance under section 365 of the Bankruptcy Code, must

be filed by September 13, 2019 at 5:00 p.m. (prevailing Eastern Time)

(the “Initial Objection Deadline”) and served on (a) the Debtors, (i)

c/o Norton Rose Fulbright US LLP (Attn: Greg Wilkes), 2200 Ross Avenue,

Suite 3600, Dallas, Texas 75201-7932, greg.wilkes@nortonrosefulbright.

com, and (ii) c/o Ankura (Attn: Scott M. Pinsonnault), The Denver Financial

Center, 1775 Sherman Street, Suite 2775, Denver, Colorado 80203, scott.

[email protected]; (b) AB, c/o Akin Gump Strauss Hauer & Feld

LLP (Attn: Sarah Link Schultz), 2300 N. Field Street, Suite 1800, Dallas,

Texas 75201, [email protected]; (c) Riverstone, c/o Vinson & Elkins

LLP (Attn: David S. Meyer and Jessica C. Peet), 666 Fifth Avenue, 26th Floor,

New York, New York 10103, [email protected] and [email protected];

(d) the Equity Committee, c/o Morris Nichols Arsht & Tunnell LLP (Attn:

Gregory W. Werkheiser), 1201 North Market Street, 16th Floor, P.O. Box

1347, Wilmington, Delaware 19899-1347, [email protected]; (e)

BSP, c/o Baker Botts L.L.P. (Attn: Emanuel Grillo), 30 Rockefeller Plaza, New

York, New York 10112, [email protected]; (f ) BP, c/o Alston &

Bird LLP (Attn: William Sugden), 1201 West Peachtree Street, Atlanta, GA

30309, [email protected]; (g) the Navajo Nation, c/o Kutak Rock

LLP (Attn: Peter J. Barrett), 901 East Byrd Street, Suite 1000, Richmond, VA

23219, [email protected]; (h) the Conflicts Committee, c/o

Chipman Brown Cicero & Cole, LLP (Attn: Mark L. Desgrosseilliers), Hercules

Plaza, 1313 N. Market street, Suite 5400, Wilmington, DE 19801, desgross@

chipmanbrown.com; and (i) the Office of the United States Trustee, U.S.

Department of Justice (Attn: Richard L. Schepacarter), J. Caleb Boggs

Federal Building, 844 N. King Street, Suite 2207, Lockbox 35, Wilmington,

Delaware 19801, [email protected] (collectively, the

“Objection Recipients”).

PLEASE TAKE FURTHER NOTICE that all objections as to the proceed-

ings of the Auction and the Successful Bidders’ revisions to the Form

Purchas Agreement and the Form Sale Order (the “Successful Bidder

Objections”) and the identity of the Successful Bidder and its ability to

provide adequate assurance of future performance under section 365 (the

“Adequate Assurance Objections”) must be filed by September 18, 2019

at 5:00 p.m. (prevailing Eastern Time) (the “Final Objection Deadline”)

and on served on the Objection Recipients.

CONSEQUENCES OF FAILING TO TIMELY ASSERT AN OBJECTION:

ANY PARTY OR ENTITY WHO FAILS TO TIMELY FILE AND SERVE

AN OBJECTION ON OR BEFORE THE APPLICABLE DEADLINE, IN

ACCORDANCE WITH THE ENTERED BIDDING PROCEDURES ORDER

MAY BE FOREVER BARRED FROM ASSERTING ANY OBJECTION TO

THE SALE, INCLUDING WITH RESPECT TO THE TRANSFER OF THE

TRANSFERRED ASSETS OF THE DEBTOR ESTATES FREE AND CLEAR OF

LIENS, CLAIMS, ENCUMBRANCES AND OTHER INTERESTS EFFECTED

THEREUNDER.

PLEASE TAKE FURTHER NOTICE that this Notice is subject to the terms

and conditions of the Motion and the Bidding Procedures Order, with such

Bidding Procedures Order controlling in the event of any conflict, and the

Debtors encourage parties-in-interest to review such documents in their

entirety. Parties interested in receiving more information regarding the

sale of the Assets and/or copies of any related document, including the

Motion or the Bidding Procedures Order, may make a written request

to counsel for the Debtors, Norton Rose Fulbright US LLP (Attn: Greg

Wilkes), 2200 Ross Avenue, Suite 3600, Dallas, Texas 75201-7932, greg.

[email protected]. In addition, copies of the Motion, the

Bidding Procedures Order and this Notice may be examined by interested

parties (i) free of charge at the Case Website at https://case.stretto.com/

elkpetroleum, or (ii) on the Court’s electronic docket for the Debtors’

chapter 11 cases, which is posted on the Internet at http://www.deb.uscourts.gov

(a PACER login and password are required and can be obtained through the

PACER Service Center at http://www.pacer.psc.uscourts.gov).

(^1) The Debtors are the following four entities (the last four digits of their
respective taxpayer identification numbers (if required) follow in paren-
theses): Elk Petroleum, Inc. (8606); Elk Petroleum Aneth, LLC (4449);
Resolute Aneth, LLC (0729); and Elk Operating Services, LLC (3197). The
address of the Debtors is 1700 Lincoln, Suite 2550, Denver Colorado 80203. 2
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Motion.